08 LS1808238 莉莉娅 2021.5

中图分类号：F841
论文编号： 10006LS1808238
硕士学位论文
人口老龄化时代下中乌养老基
金管理的比较研究
作者姓名: 莉莉娅 LS1808238
学科专业: 金融学
指导教师: 马杰
培养院系: 经济与管理
Comparison research on pension fund management in
China and Ukraine: under the era of population aging
A Dissertation submitted for the Degree of Master
Candidate: Liliia Mokliak
Supervisor: Ma Jie
School of Economic and Management,

Beihang University, Beijing, China
中图分类号：F841
论文编号：10006LS1808238
硕士学位论文
人口老龄化时代下中乌养老基金管理的
比较研究
作者姓名莉莉娅申请学位级别金
融学硕士
指导教师姓名马杰职称
副教授
学科专业金融学研究方向金融
学习时间自 2018 年 09 月 01 日起至 2021 年 05 月 26 日
论文提交日期 2021 年 04 月 28 日论文答辩日期 2021 年 05 月 26
日
学位授予单位北京航空航天大学学位授予日期 2021 年 07 月 01
日
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28 日
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28 日
摘要
养老金制度的有效运作是国家经济发展的关键。养老金制度运作过程中可能会出
现问题，对国家机构和经济发展造成负面影响，因此必须事先查明并预防这些问题。
退休收入的保障与稳定是年轻人和未来人们高度关注的话题，一些劳动力降幅超过了
退休人数的国家尤为如此（Cadoni, et al., 2017），这就是我们要开展这项研究的原因。
人口老龄化是发达国家共同面临的问题，也是影响养老金的一个主要因素。老年人数
量的增加对养老金资产体系造成很大冲击。因此，有必要对养老金的执行情况进行有
效性评估、寻找并分析养老政策的所有选项，以防止养老金预算出现赤字。本文分析
了在人口老龄化的紧张态势下，养老金制度面临的各种挑战。
这些数据包括了中乌两国十年间（2009-2018 年）的人口变化以及经济增长，通
过对比这些数据发现其对国家养老基金系统运行的影响。这两个国家面临着人口增长
这个全球性问题，并且亟需改革。这项报告分析了养老金的概念、功能以及结构组成，
特别是世界上许多国家都在使用的“现收现付”养老金制度。除了中国和乌克兰两个
国家以外，分析世界上其他国家养老金制度也是十分重要的。首先，中乌两国同样面
临着人口老龄化的问题，通过分析人口变化的数据可以使我们了解两国在人口老龄化
的情况下养老基金的收入与支出来源。其次，这项调查也收集了两国有关养老金制度
特点的信息，包括两国的退休年龄、养老金福利发放数量、国家养老金预算支出以及
保险期限。第三，通过收集数据来研究人口变化与经济增长指标之间的关系，从而论
证不同年龄段的人口变动与经济指标之间的相关性直接影响到两国养老基金的运作。
这些计算反映出了乌克兰和中国的养老金制度随着养老金支出的增加、城市人口的增
长和劳动力数量的下降出现的问题。本研究也为两国政府提供了建议，以解决在全球
人口老龄化背景下持续增长的养老金支出带来的相关问题。这份调查的特点是综合分
析了经济和人口因素，如出生率、城市化率、人口预期寿命等因素对养老金制度的直
接影响。因此，本文的独特之处就在于收集两国养老金部门状况的完整信息，通过对
所有指标的分析从而预测出未来的人口及经济趋势，并做出适当的决策，加以优化养
老基金的制度与发放。
关键词：养老金，人口老龄化，养老制度，养老金可持续性。
Abstract
The effective operation of the pension fund is the key to the country's economic
development. Problems that may arise in the pension fund activities and lead to negative
consequences for the state agency and the economy must be identified in advance and
prevented. Security and the uncertainty of retirement incomes are highly topical issues for
young workers and future generations, especially in countries where a reduction in the ratio
of workers over retirees has occurred (Cadoni, et al., 2017) - this explains the motivation for
this work. Population aging is a problem faced by all developed countries of the world. The
aging of the population is a problem that primarily has a significant impact on the pension
fund. The increase in the number of older people is a considerable blow to the pension
system's assets. Therefore, it is necessary to estimate the efficiency of pension fund
performance, find and analyze all options for pension policy to prevent a deficit in the
pension fund budget. This paper considers all possible risks in the pension fund in the
conditions of intensive aging of the population.
The analysis is based on data from two countries - China and Ukraine. These data
include information on demographic and economic processes in the field of pension fund
operations in China and Ukraine for ten years (2009-2018). These countries have global
problems in population growth and need reforming. The proposed report examines the
concepts, functions, and structure of the pension fund; attention is drawn to the Pay as You
Go system used in the world's pension systems. It is essential to analyze the pension system
structure in China and Ukraine and other countries. First, this analysis makes it possible to
understand the sources of income and expenditure of the Pension Fund of both countries in
a difficult demographic situation. Secondly, it collects generalized information about the
peculiarities of the pension system in China and Ukraine, namely the retirement age, the
number of pension benefits, state budget expenditures on pensions, the insurance period.
Third, the correlation between demographic and economic indicators, which according to
the research hypotheses, have a direct impact on the work of the pension fund, has been
studied. According to these calculations, the problems of the Pension funds in Ukraine and
China are reflected as follows: the growth of the fund's expenditures, due to the urban
population growth, due to the decrease in the share of employees compared to retirees, etc.
Recommendations are also provided for both countries' governments to solve the problem
of increasing the pension fund costs in connection with the global aging population. The
peculiarity of this work is the combination of analysis of economic and demographic
factors, such as the birth rate, urbanization rate, and life expectancy of the population on the
pension fund results. Thus, the dissertation's uniqueness is the collection of complete
information on the situation in the pension sector of both countries, and the analysis of
indicators used allows to predict future results and make appropriate decisions to optimize
the activities of Pension Funds.
Key words: pension fund, population aging, pension system, pension sustainability
Contents
Abstract.................................................................................................................................II
1 Introduction of pension fund management system......................................................1
1.1 Introduction and Background....................................................................................1
1.2 Research outcome, theory, and methodology............................................................2
1.3 Research data.............................................................................................................3

1.3.1 International data...........................................................................................................................3
1.3.2 Domestic data..................................................................................................................................4
2 Literature Review...........................................................................................................5
2.1 The Conception of pension funds..............................................................................5
2.2 Pension system in different countries........................................................................8
2.3 Demographic indicators...........................................................................................10
2.4 Pension system economic indicators.......................................................................11
2.5 Econometric models in Pension management system.............................................12
3 Levels and trends in population aging........................................................................15
3.1 Aging population general overview.........................................................................15
3.2 Analysis of the main demographic indicators.........................................................20

3.2.1 Population size and growth.........................................................................................................20
3.2.2 Life expectancy.............................................................................................................................23
3.2.3 Fertility trends..............................................................................................................................24
3.2.4 Death rate......................................................................................................................................27
4 Pension fund management in China and Ukraine.....................................................31
4.1 Pension fund legislation...........................................................................................31
4.2 Pension fund activity...............................................................................................32
4.3 Pension benefits level..............................................................................................35
4.4 Pension fund contribution........................................................................................38
4.5 Financial sustainability in Pension fund..................................................................39

4.5.1 Assets of the Pension fund relative to GDP................................................................................39
4.5.2 Income and expenses of the Pension fund..................................................................................40
4.5.3 Deficit/surplus of the Pension fund.............................................................................................41
4.5.4 Share of transfers from the budget relative to GDP.................................................................42
4.5.5 Debt of enterprises, institutions, and organizations for payments to the Pension funds.......43
4.6 Necessity of the pension reform..............................................................................43
5 The impact of population aging on the work of the pension fund...........................46
5.1 Model description....................................................................................................46
5.2 A set of scenarios.....................................................................................................49
5.3 Analysis of the impact of demographic indicators on the income and expenses of
the Pension fund.................................................................................................................51
5.3.1 Hypothesis 1: An increase in the share of pensioners leads to an increase in Pension fund
costs ........................................................................................................................................................51
5.3.2 Hypothesis 2: An increase in urbanization will increase the cost of the Pension fund in
China ........................................................................................................................................................55
5.3.3 Hypothesis 3. An increase in retirement age positively affects the work of the Pension fund
in Ukraine..................................................................................................................................................57
5.3.4 Hypothesis 4. An increase in birth rate and retirement age positively affects the work of the
Pension fund in Ukraine...........................................................................................................................59
5.3.5. Hypothesis 5: An increase in birth rate, urbanization rate, and life expectancy has a positive
effect on the work of the Pension fund in China....................................................................................63
5.4 Recommendations....................................................................................................68
Conclusion............................................................................................................................72
References.............................................................................................................................73
List of Figures
Figure 1. The overview of old-age pension schemes, by type of scheme and benefit, 2015. .6
Figure 2 Advantages and disadvantages of a funded system...................................................8
Figure 3.Percentage of people over 60 years of age in the world's population in 1950 and
2020.......................................................................................................................................15
Figure 4. The proportion of people aged 65 and older from the total population in different
countries of the world in 1960, 2000, and 2019, %...............................................................17
Figure 5. World Population Pyramid (1950, 2019)................................................................18
Figure 6. China Population Pyramid (1950, 2019)................................................................19
Figure 7. Ukraine Population Pyramid (1950, 2019)............................................................20
Figure 8. Population in China 1950 - 2019............................................................................22
Figure 9. Population in Ukraine 1950 - 2019........................................................................23
Figure 10. World life expectancy in 1950- 2019..................................................................23
Figure 11. Life expectancy at birth by country in 1960, 2000, 2018, total (years)..............24
Figure 12. World birth rate, crude (per 1,000 people)..........................................................25
Figure 13. Birth rate, by country in 1960, 2000, 2018, crude (per 1,000 people)................26
Figure 14. World death rate crude (per 1,000 people)...........................................................28
Figure 15. Structure of the Chinese pension system.............................................................34
Figure 16. Average monthly pension and wage in China in 2009-2018, RMB....................35
Figure 17. Average monthly pension and wage in Ukraine in 2009-2018, UAN.................37
Figure 18. Income and expenses in Chinese Pension fund 2009-2018, RMB......................40
Figure 19. Income and expenses in Ukrainian Pension fund 2009-2018, UAH...................41
Figure 20. Deficit of the Pension fund in Ukraine relative to GDP in 2009-2018, %..........42
Figure 21. Urbanization rate in China and the world in 1960- 2019, %...............................55
Figure 22. Chinese Pension fund profit, billion yuan...........................................................64
List of Tables
Table 1. Basic elements of the Three-Pillar pension systems between Australia, USA,
Germany, China, and Ukraine..................................................................................................9
Table 2. Principal component analysis, the seven primary components...............................13
Table 3 World Population by Continents, people, 2020........................................................21
Table 4. New insurance policy in accordance with the years in Ukraine..............................36
Table 5. Replacement rate in China and Ukraine 2009-2018................................................38
Table 6. Individual Income Tax rates in China......................................................................39
Table 7. Assets of the Pension fund relative to GDP.............................................................40
Table 8. Share of transfers from the budget relative to GDP, Ukraine in 2009-2018, %......42
Table 9. China's pension policy (Tao Liu & Li Sun, 2016)...................................................44
Table 10. Set of scenarios to analyze Ukrainian Pension System.........................................49
Table 11. Set of scenarios to analyze Chinese pension system..............................................49
Table 12. Data for the study of the influence factor of population pressure on public
spending per Pension fund.....................................................................................................52
Table 13. Result of the study of the influence factor of population pressure on public
spending per Pension fund in Ukraine...................................................................................53
Table 14. Result of the study of the influence factor of population pressure on public
spending per Pension fund in China......................................................................................54
Table 15. Urbanization rate and Pension Fund Expenses in China (2009-2018)..................56
Table 16. Result of the study of the influence factor of urbanization rate on Pension fund
activities in China..................................................................................................................56
Table 17. Retirement age and Pension fund income in Ukraine (2009-2018).......................58
Table 18. Result of the study of the influence factor of retirement age on Pension fund
activities in Ukraine...............................................................................................................59
Table 19. Fertility rate, average pension age and Pension fund gap in Ukraine (2009-2018)
...............................................................................................................................................60
Table 20 Result of the study of the influence factor of retirement age, fertility rate on
Pension fund activities in Ukraine.........................................................................................61
Table 21. Details of Hypothesis 4..........................................................................................62
Table 22. Hypothesis 4 scenario summary............................................................................63
Table 23. Fertility rate, pension age, urbanization rate, life expectancy, Pension fund surplus
in China (2009-2018).............................................................................................................64
Table 24. Result of the study of the influence factor of the fertility rate, urbanization rate,
retirement age, life expectancy on Pension fund activities in China.....................................65
Table 25. Details of the scenario of hypothesis 5..................................................................66
Table 26. Hypothesis 5 scenario summary............................................................................67
BUAA Academic Thesis for Master’s Degree
1 Introduction of pension fund management system

1.1 Introduction and Background
The aging process is an inevitable reality that we can continuously observe around
us and be prepared for at all stages of life. In gerontology, aging is associated with the loss
and gradual reduction of the human body's ability to adapt to the environment. From an
economic perspective, the concept of aging is seen as a process in the life of an individual
subject of social and financial relations, accompanied by irreparable loss of ability to
function at previous levels of efficiency. In current socio-economic development conditions,
one of the leading social protection institutions is the system pension provision, designed to
prevent poverty among retirees, meet their basic needs, replace lost income and maintain a
usual standard of living after disability.
The pension systems of most countries have undergone significant changes over the
last decade. The main factors of reform are the deterioration of demographic trends is a
significant change in the ratio between workers and those who receive pensions, changing
the structure of production and consumption of the national product. Aging has directly
impacted the financing of the solidarity system, as fewer people of working age have to
maintain adequate pensions for the growing number of older people in the world as a whole.
Due to the inevitable population aging trends, there will be a further increase in
retirees concerning workers. In this regard, sooner or later, the question of the pension
system's financial capacity will arise. To balance the abolition of income and cost of the
pension fund, it should either increase the retirement age and increase the rate of
contributions or reduce benefits. Simultaneously, the review of the state of the world's
pension systems allows us to state that pension provision's theoretical and practical aspects
are not perfect and need further research.
The relevance of this topic is over the past 70 years. On a global scale, the
population aging process has been developing rapidly, that any disregard for significance is
associated with negative consequences for the social state policy. Society affected by the
aging process is subject to demographic and economic, social, and psychological changes.
According to UN forecasts, by 2035, 13 percent of people on the planet will be 65 years or
older, which is 1.1 billion people. For a long time, the fate of the elderly has not changed
much. In both 1980 and 2010, 16 people aged 65 and over per 100 people aged 25-64 in the
1
Chapter 1. Introduction of pension fund management system
world. By 2035, the UN estimates that the ratio will rise to 26 people. In the wealthiest
countries, aging is the fastest (United Nation, 2019).
The challenges that come with global society's aging are numerous. First, the
number of elderly retirees is rising. Since the percentage of working-age persons donating
to pension funds is decreasing, these funds are burdened with unsustainable pension costs.
The pension fund will assume severe risks of failure to pay pensions to all elderly citizens in
the future. Second, society faces difficulty in organizing caring for an aging population.
Third, medical care for the elderly, the need for which naturally increases as we age.
Medical care requires additional funds, expansion of the network of medical and
gerontological institutions, and qualitative restructuring of the health care system. Fourth,
employment of the elderly population, providing jobs for those who want to work.
The solution to the first group of problems is to create a robust risk management
system that would make it possible to prepare for over-payments in the future and find all
ways to reform the pension system of each country.
The pension reform's fundamental goal is to achieve the best balance between the
accumulative and distributive parts of the pension. Previously, the pension system in many
countries was based solely on the principle of redistribution of funds. International
organizations have long tried to develop a standard ratio of redistributive and accumulative
elements for all countries. In the end, global society decided that each country should
choose its pension system model, taking into account its specifics.
1.2 Research outcome, theory, and methodology
This research aims to look at the impact of population aging on the pension fund's
budget, consider some possibilities for possible pension reform, and recommend a solution.
All the necessary information for the last ten years (2009-2018) was collected. First,
it is all data about the population of China and Ukraine: the age structure, the processes of
population aging, birth rate, and mortality. It also will be needed information about the
population's involvement in the labor market, taxes, and pensions. It will be essential to
collect information about the results of the pension fund and calculate performance
indicators.
All the data was taken from official sources in China (National Bureau of Statistics
of China, National Social Security Fund) and Ukraine (State statistics service of Ukraine
and the Pension fund of Ukraine) as well as from reports of international organizations (UN,
OECD, IMF, WB).
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BUAA Academic Thesis for Master’s Degree
Methodology and theory play a leading role in scientific research, based on the
theoretical foundations and the data obtained from the studied problem, determine the path
of study.
In the study, we used the following research methods:
 analysis and synthesis – the pension fund's work in China and Ukraine was
reviewed and studied, and the leading economic indicators of its activity were analyzed.
 induction and deduction – the problem of population aging was considered
both at the global level and on the example of the above countries with a comparison of
indicators.
 modeling – a set of correlation models that explain the relationship between
pension fund expenditures and population growth is considered. This study also makes it
possible to forecast future pension fund expenditures.
1.3 Research data

Various databases are used to understand the problem, analyze past performance,
and forecast indicators for the future. To determine the effects of the aging process of the
population, calculate the magnitude of the costs and potential risks in the pension fund, it is
necessary to use official statistics by the competent authorities.
1.3.1 International data
We refer to international databases as resolutions and documents of international

organizations. Competent organizations in global population aging and pension fund
problems are the Department of Economic and Social Affairs in the United Nations, World
Health Organization, World Bank, Organization for Economic Co-operation and
Development (OECD). Every year there are congresses of members of international
organizations. They resolved the state and industry, topical issues, and the results of work
for the past period are presented.
These reports, which are used to study the impact of population aging on the amount
of pension fund expenses, are:
1) Unіted Nations, Department of Economic and Social Affairs, Population Division
(2019). World Population Ageing 2019: Highlights;
2) Unіted Nations, Department of Economic and Social Affairs, Population Division
(2019) Population Facts, No. 2019/6;
3) OECD “Pensіons at a Glance 2019: OECD and G20 Indicators”;
4) OECD Core Prіnciples of Private Pension Regulation 2016;
3
Chapter 1. Introduction of pension fund management system
5) OECD “Strengthenіng the application of OECD Core Principles of Private

Pension Regulation: Lessons from Investment Institutions” 2018;
6) OECD (2019), Pensіon Markets in Focus;
7) World Bank “Agіng populations, pension funds, and financial markets: regional
perspectives and global challenges for central, eastern, and southern Europe by Robert
Holzmann.
In these reports, it is possible to find actual statistical data relating to such concepts:
“the number of persons aged 65 years”, “global population by broad age groups,” “life
expectancy,” “old-age dependency ratios,” “Total pension expenditure,” “Gross Public
Pension Expenditure” in each country.
1.3.2 Domestic data
Each state has created special agencies that collect information, combine and present
national statistical data. Domestic data is represented in two ways. The needed information
is available in two places: first, statistical service bulletins, and second, directly in the files
of the department in charge of this material. In China, it is the National Bureau of Statistics
of China and the National Social Security Fund. In Ukraine, it is the State statistics service
of Ukraine and the Pension fund of Ukraine. Reports on the work of these bodies provide
detailed information about macroeconomic concepts and understand the causes of certain
phenomena.
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BUAA Academic Dissertation for Master’s Degree
2 Literature Review
2.1 The Conception of pension funds
M. Cadoni defined a pension fund as a financial institution that invests retirement

savings from workers in providing pension benefits (Cadoni, et al., 2017). In the Ukrainian
economic dictionary, we can also find a definition of pension fund: the state-off-budget trust
fund formed from contributions of enterprises, entrepreneurs, organizations and developing
on this basis the funds from which pensions are paid to citizens (Reisberg, et al., 2019). The
pension fund is the core of each country's pension system. The pension fund is one of the
mechanisms of the state whose primary function is to provide social security for citizens. In
particular, the Pension Fund is designed to provide financial assistance to those citizens
who, due to various reasons, have lost their ability to work and are not able to provide for
themselves. Resources for this type of financial assistance come from public finances. A
funded scheme aims to build up a body of investment assets from the contributions of both
employer and workers, so that the earnings from, and the capital value of, those assets are
available to finance the pension obligations of the employer when the employees retire
(Piggott, et al., 2010).
Ukrainian legislation establishes the core functions of the Ukrainian Pension Fund,
also the same functions of other countries. The main functions of the Pension fund are:
 participation in the formation and implementation of state policy in the field
of pension and social insurance;
 ensuring the collection and accumulation of funds intended for pension
provision, complete and timely financing of expenses for the payment of pensions, burial
assistance, and other social fees made from the funds;
 effective use of funds of the Pension fund of Ukraine, implementation of
control functions within its competence, improvement of financial planning methods,
reporting, and control over the expenditure (Law of Ukraine , 2020).
The uniqueness of the pension fund is that, unlike other state institutions, it is both a
social and financial institution. Each country has its financial management bodies. The
Natіonal Councіl for Social Security Fund works with the State Council to manage old-age
pension funds on behalf of provincial governments.
According to the Ukrainian law, the Pension fund is the body that manages the
solidarity system, collects, accumulates, and accounts for insurance premiums, appoints
pensions, and prepares documents for its payment, provides timely and complete funding
5
Chapter 2. Literature Review
and payment of pensions, burial assistance, monitors the intended use of Pension fund
funds, solves issues related to keeping records of pension assets of insured persons in
accumulative pension accounts, administers the Accumulative fund and other functions.
Old-age pension schemes anchored in national

legislation providing periodic cash benefits 186
Information available for 192 countries (97%)
countries (100%) No old-age pension scheme anchored in national
legislation providing periodic cash benefits 6
countries (3%)
Contributory Contributory scheme only 72 countries (39%)
Non-contributory universal schemes only 10

countries (5%)
Non-contributory Non-contributory means-tested schemes only 2
countries (1%)
Contributory scheme and Non-contributory

means-tested schemes 64 countries (34%)
Mixed pension scheme pension-tested schemes 24 countries (13%)
universal schemes 14 countries (8%)
Figure 1. The overview of old-age pension schemes, by type of scheme and benefit, 2015
Sources: ILO, 2015
There are different types of pensions. Types of Pension Scheme are presented in
Figure 1. One common classification of the pension system is in terms of financing method,
including unfunded and funded types.
 Unfunded or PAYG. According to the glossary, “it is a method of financing
in which current expenditure on pension benefits are paid out of current revenues from an
earmarked tax, often a payroll tax.” (The International Bank for Reconstruction, 1996).
 A funding program is one in which committed funds are collected to offset
the scheme's liabilities. These funds are allocated to the pension plan by statute or
arrangement and must be used to finance pension benefit commitments.
Funds are obtained to pay possible obligations in a fully invested scheme to the
degree that accumulated savings and investment returns are necessary to cover the present
value of the whole flow of projected pension risk at any moment. Partially financed pension
plans are possible (Wong, 2015).
6
In PAYG, pensions may be financed from a reserve or fund that has been built up
over the years by investing accumulated contributions in earning assets. This system is
called the accumulation of funds or funded financing. Optionally, the employer's new
payments and existing employees, and other income can be used to support the pension
expenses of retiring employees on a year-to-year basis. This system is known as pay-as-
you-go (Piggott, et al., 2010).
Gaylord C. Cummin, a scientist, identified the PAYG system's weaknesses in 1924:
 The plan of financing public improvements is far more costly to the taxpayer
than any other financially sound method.
 The plan for annually recurring improvements places a heavy burden on the
present taxes and entails the same losses in the first case.
 This system neglects the wealth-producing quality of wisely-made public
improvements as (Cummin , 1924).
The Pay As You Go system іs the method of managing spending with available
funds rather than borrowed. So the money that comes into the pension fund as contributions
from employees is not accumulated for their pensions but is paid to today's retirees.
Sometimes, this is referred to as a contract between the generations, with today's taxpayers
paying for today's pensions to understand that their pensions will be paid for by the
taxpayers of the future when they retire.
In contrast to this system, there is also a funded system where employees' money is
accumulated for their future pensions in a personal account. All countries of the world are
trying to switch to it, but negative economic and demographic factors delay this. The funded
system provides that the contributions paid from it will be used for investment and not for
the payment of current pensions. Interest will accrue on the paid contributions, and in the
best-case scenario, this benefit will save money on inflation covering administrative
expenses. Anita M. Schwarz and others, in their report “Why Consider a Funded Pension
System?” (Schwarz, et al., 2014) presented advantages and disadvantages of a funded
system (Figure 2).
7
1. More prepared to cope with the population's aging

2. Better rates of return on pension contributions
3. Limited fiscal liabilities
Funded system 4. Removes some labor market distortions
advantages
5. Increases capital market development and even possibly
savings
6. Reduces the politicization of the pension system
1. Impose investment risks on workers (Although workers

face the political risk of nonpayment and changes to the
system in unfunded schemes)
Funded system 2. Potential costs to the government of providing minimum
disadvantages: benefits
3. Poverty in old age
Source: Schwarz, et al., 2014

Figure 2 Advantages and disadvantages of a funded system.
As we can see, the funded system is better for people and the economy as a whole,
but this system will result in the long term. So to pay off the debt owed to pensioners here
and now, most countries use the system.
2.2 Pension system in different countries
Nearly forty countries have implemented structural pension reforms since 1981 that
have replaced all or part of prior pay-as-you-go schemes with privately managed, funded
defined contribution pillars or systems (Wang, et al., 2016). Pension reform is a set of
measures that change the conditions of pension provision. The reform may be different, but
there is a steady trend in the world towards changes in the social security of citizens.
The need for radical pension reform on an international scale arose after 1994 when
the World Bank presented a report that clearly outlined the problem of global aging. The
average age of our planet's inhabitants is growing. Since it is not always possible to “push
back” the retirement age for many reasons, every country will face a deficit in the budget
intended for retirement sooner or later. The Council of Countries attempted for a
considerable time to create a universal pension system for all countries. Still, in the end, it
was agreed that each country should select its pension system model, taking into account its
unique characteristics.
Around two hundred pension systems in the world differ in how seniority is taken
into account for calculating pensions, how training is included in seniority, how breaks in
employment are taken into account, etc. All systems combine the accumulative part
8
(flexible contributions that can be invested and formed individually) and the distributive
part (fixed pension contributions).
Table 1. Basic elements of the Three-Pillar pension systems between Australia, USA, Germany,
China, and Ukraine
Nation Three-Pillar’ for each of Compulsory/ Source of Participation

Voluntary(C/V) funds constraints
Australia Pillar1 The age pension C Government Pay-as-you-go
budget system (PAYG)
Prescribed age of
benefits entitlement
(male/female) ⩾ 67
Pillar2 Superannuation C Employer Completely
guarantee accumulative system
(CA)
Pillar3 Individual savings V Individual CA
USA Pillar1 Government С Government Pay-as-you-go
Pension budget system (PAYG)
The retirement age -
65.5 years
Pillar2 Private corporate С Employer СА
Pillar3 Voluntary private V Individual СА
pension
Germany Pillar1 Mandatory state C Government PAYGThe retirement
pension . budget age - 65 years old
Pillar2 Company or V Employer CA

occupational
pensions
Pillar3 Private pensions V Individual CA
China Pillar1 Basic pension C Employer PAYG (pooling
For urban working account)
cadres
For urban and rural V Employer CA (individual
residents account)
(Open to people Local
permanent government CA
residence, who is
not in the system Central PAYG
for urban Working government
cadres with local
registered)
Pillar2 Employer & V Participation CA
employee status
Pillar3 Individual V For all CA
residents
Ukraine Pillar1 Basic pensions C Government PAYG
budget
Pillar2 Accumulative V Individual CA
pension
Pillar3 Private pension V Individual CA
Source: Mao, 2019, Fenge, 2018, Kulikova, 2018
9
To better understand the diversification of pension systems globally, it is necessary

to consider countries such as Australia, the USA, Germany, China, and Ukraine. All these
countries face the inevitable problem of population aging. As we can see in all these
countries, the pension system consists of three pillars. The government also established the
third stage to alleviate the Pension fund's pressure. The third level consists of individual
funds of a citizen who makes payments throughout his life. Also, all countries have state
pensions, which the state provides for everyday life after retirement. Ideally, an employee's
contributions in taxes should be accumulated in individual accounts until that employee
retires. But since pension funds of countries such as Germany and Ukraine are subsidized,
payments are made to pay off debts to today's pensioners. We can distill the critical
recommendations into one single imperative; it would be “to operate the pension plan as if
it were a business.”
2.3 Demographic indicators
The aging society is a global problem, with an increase in the amount and
percentage of older adults in almost every region. In 2019, the world's number of people
aged 65 and over totaled 703 million. In 2050, the number of older people is predicted to
double to 1.5 billion. But what is the most significant impact of population aging on the
economy of any country? Some scientists consider the result of the financial market
(D'Arcangelis, et al., 2019), others think the labor market ( (Febrero, et al., 2006); (Nerlich,
et al., 2018)), some authors pay attention to the budget burden on the pension fund ( (Melis,
et al., 2012); (Bongaarts, 2004); (Wang, et al., 2014)).
Pension plans seek to provide some retirement income while maintaining financial
stability, and ageing population is a constant threat due to higher life expectancy and a low
birth rate. The OECD states that the proportion of people aged 65 and over will increase
from 8% of the world's total population in 2015 to almost 18% by 2050 (OECD, 2019). To
maximize the benefits and manage the risks associated with population aging, governments
should support:
 sustaining and lifetime schooling and health insurance for all;
 supporting savings habits and healthier behaviors over one's life;
 fostering jobs for women, elderly persons, and those who have historically
been removed from the workforce, including by a steady rise in the minimum wage;
 family-friendly programs promote work-life balance and gender equity
(United Nations, 2019).
10
2.4 Pension system economic indicators
The aging population directly affects the financing of the solidarity pension system
(PAYG) since the decrease in the working-age population should support the retirement
level for the growing retirement-age population (Godínez‐Olivares, et al., 2016).
Modern pension systems are not yet ready to switch to funded ones and this pay-as-
you-go system is not suitable for the current conditions of an aging population. The old
system must be reformed. But how do you know what methods to use and how to
implement reforms. It is well understood that PAYG systems require a balance between the
benefits paid to the pensioners and the active workers' contributions, referred to as
intergenerational solidarity. A successful PAYG system needs to reflect intergenerational
solidarity and long-term sustainability (Godínez‐Olivares, et al., 2016).
To evaluate pension reforms, a much broader sustainability process that combines
both pension scheme adequacy and fiscal sustainability must be used. The paramount
objective of a pension system is to achieve financial sustainability. A bankrupt system can't
provide adequate pensions to its participants. In the long term, a system that is not
sustainable cannot fulfill the promises to pay benefits, not ever mentioned to obtain the
pension adequacy. Thus, ensuring the financial sustainability is essential in a pension
system (Xu, 2017).
Typically, sustainability is thought of as a condition that can be managed for the
near future. Nonetheless, the theoretical frameworks of the different writers are both
underpinned by a representative agent paradigm in which the government must meet an
intertemporal budget constraint as well as a static budget constraint in each period (Chalk,
et al., 2000). The Pension Sustainability Index is a guide for monitoring pension scheme
adjustments in countries all over the world. Focusing on the sustainability of a country's
public pension systems can indicate a need for pension reform. Since national pension
systems tend to differ in their institutional, technical, and legal details, this cannot be
unraveled. However, some of the key variables impacting the sustainability of public
pension systems are mostly constant from country to country. Using these variables, the
Pension Sustainability Index can measure and illustrate the pressure on governments to
reform their pension systems by consistently examining the various dimensions of pension
systems (Finke, Renate, 2009).
The analysts use two metrics to measure each country's fiscal sustainability. The
disparity between the current fiscal balance and the fiscal balance required to reach a
particular level of total public debt-to-GDP in a given year is known as the debt goal key
11
gap. The intertemporal primary gap is the shift in the fiscal balance needed to get the
present value of future credits to the same amount as the current debt level (Leigh, et al.,
2007).
Indicators used to evaluate pension system adequacy are replacement rates as
measures of adequacy of pension entitlements, gross replacement rate, median pension
relative to median earnings, relative income of 65+ to working age (Aaron, 2010).
The author claims that the more significant the reduction in projected public pension
spending in 2050 between two base years, the more effective the country's pension reform
(Schneider, 2009). A pension scheme is ineffective only because it requires less public
expenditure –a good pension program meets its aims with the least cost. In 2005 OECD
presented the APEX (Analysis of Pension Entitlements across Countries) model, and it
estimates multiple pension metrics for hypothetical persons based on a variety of
assumptions, such as:
 Replacement rates in gross and net;
 Pension value;
 Pension wealth in gross and net terms.
At each level of pension reform, the state must ensure that the population does not
face poverty and health and employment problems after working age. This should be
ensured for all people, regardless of race, gender, or occupation (Scobie, 2006).
The stability of pension systems may be measured with the following indicators:
Projected pension spending (% of GDP), Projected contribution revenues (% of GDP),
Implicit pension debt (% of GDP), and Present value of contribution revenues (% of GDP)
(Romero-Robayo, et al., 2015).
2.5 Econometric models in Pension management system
Many authors from the analyzed sources used econometric models to explain their
guesses in future pension funds changes.
Huan Wang has developed a model to study the pension fund's financial
sustainability and the effectiveness of implementing reforms. To create a model of
economic sustainability, the author first derived the Projection Models of Population. So,
projection Models of Population and formulas of public pension contributions and total
pension expenditure were presented. Next, the author considered three scenarios: Fertility
Scenarios, Retirement Scenarios, and Combination scenarios. The result showed that the
mixed scenarios study shows that simultaneous policy changes are more successful than a
12
single reform. In the long term, neither the fertility program change nor the retirement delay
will fundamentally address the pension payment problem. Based on these empirical reports,
it was recommended that the government adopt a set of family support policies to enable
people to have more children (Wang, et al., 2019).
In the article “Public pensions' sustainability and population aging: Is immigration
the solution?” authors presented a model that describes a situation of financial equilibrium
that can be represented as a dynamic model since it estimates for each year the number of
pensions that guarantee the system's economic stability, i.e., the number of allowances
needed to secure the balance between the pension system's expenditures and revenues,
known as “equilibrium pensions” (Serrano, et al., 2011). In this article, the authors
considered the impact on financial stability through the migration process and checked
several scenarios.
Table 2. Principal component analysis, the seven primary components
Dataset 2001-2005 2006-2010 2011-2015

1st component GDP (0.96) GDP (0.96) GDP (0.98)
Import of goods and Import of goods and Import of goods and
services (0.94) services (0.93) services (0.95)
Inflation (0.89) Inflation (0.94) Inflation (0.76)
Investment (0.79) Investment (0.83) Investment (0.81)
Number of births Number of births Number of births
(0.90) (0.90) (0.95)
Private sector debt Private sector debt Private sector debt
(0.93) (0.95) (0.87)
Total labot force (0.91) Total labot force (0.93) Total labot force (0.92)
2nd component Median age of Median age of Unemployment rate
population (-0.7) population (-0.71) (0.81)
Long-term interest
rates (0.75)
3rd component CAB (0.70) CAB (0.65) CAB (-0.71)
4th component Unemployment rate (- Unemployment rate (- CAB (-0.46)
0.80) 0.54)
5th component CPI (-0.45) Dempographic Compensation of
dependency (-0.60) employees (-0.42)
6th component Compensation of Compensation of Compensation of
employees (-0.52) employees (-0.60) employees (-0.46)
7th component Investment (-0.33) Investment (-0.40) Long-term interest
rates (0.34)
Source: Ntotsis, et al., 2019
Another model from the article “Pension financing in China: Is there a looming
crisis?” was developed to determine the state deficit in China's Pension fund. The author
used several formulas and models to find the relationship between indicators and the
amount of shortage. The author's work differs from Huan Wang (2019). The author finds
the pension fund's deficit by analyzing such indicators as Overspending in individual
13
accounts, Shortage in the social pooling account. The Chinese government directly funds
the growth of the country's pension scheme through public spending, ensuring that the
pension funding deficit is filled until it occurs; the fiscal strain of pensions in the future,
there should be no financial crisis as long as discretionary receipts rise by at least 6.18
percent each year. Still, China's economic pension challenges are real and growing and can
no longer be ignored. This why China should promote pension reform to alleviate some of
the anticipated financial burden related to population aging without penalizing current and
future retirees (Wang, et al., 2014).
Kimon Ntotsis (2020), in the article “On the Modeling of Pension Expenditures in
Europe,” presented a model of Public expenditure in Pension funds based on the following
indicators (Table 2).
The authors rely on multivariate analysis techniques, including principal component
analysis (PCA) and generalized linear models (Mccullagh, et al., 1989), to model public
pension expenditures by identifying the appropriate set of factors from a long list of
possible explanatory variables that likely act on and affect the spending. They proceed with
the stepwise regression analysis using the seven components of PCA from the previous
section as independent variables and Y = logit (pension expenditures as a percentage of
GDP) as the dependent variable (Ntotsis, et al., 2019).
14
3 Levels and trends in population aging

3.1 Aging population general overview
Due to the general decline in the natural growth rate and the increase in the average
life expectancy of the world's population, the proportion of children decreases while older
people are increasing. This change in the ratio of age composition in favor of older age
groups is called population aging. This process is taking place in more and more countries,
and in
the middle of the twentieth century, in many countries, the proportion of older people in the
total population began to increase, which later became known as “aging or population
aging.” Traditionally, the age group of older people includes people aged 60 years and older.
But with the increase in average life expectancy in most developed countries, this age is
considered 65 years and older. The aging of the population results from long-term
demographic changes and shifts in the parameters of population reproduction, primarily in
the birth rate and mortality. According to UN projections, over the next half-century, both
absolute and relative populations over working age will continue to grow, becoming a key
challenge for the world. Some countries are already experiencing constraints due to
demographic aging in implementing consolidated fiscal policy, labor policy, social
protection, health care development, etc.
Percentage of people over 60 years of age in the world's population in 1950 Percentage of people over 60 years of age in the world's population in 2020
60+ 60+
8% 13%
Other groups Other groups

92% 87%
60+ Other groups 60+ Other groups
Figure 3.Percentage of people over 60 years of age in the world's population in 1950 and 2020
Source: United Nations, 2019.

Population aging has many consequences.
1) Economic consequences and challenges of population aging:
15
Chapter 3. Levels and trends in population aging
 Decreased productivity;
 The decrease in the share of the economically active population;
2) Fiscal challenges:
 reduction of tax revenues and at the same time increase of expenses for
pension and medical provision;
 The gap in the choice of priorities during the election. The larger the share
of the population of retirement age, the lower the chances of choosing candidates who talk
about investing in education, kindergartens, and other areas that young people need.
The agіng of the population creates problems related to ensuring the financial
stability of both pension systems based on income redistribution. Part of the income of
younger generations is used to benefit older generations and the health system. Since
women make up most senior people and are less involved in the labor market during theіr
lifetime, they are partіcularly at risk of being among the poor in old age. An aging
population can provide additional and permanent increases in per capita income and
economic growth, provided that more women participate in the labor market as a result of
fewer children, that investment in the health and education sectors increases, and that
people save more for life over a more extended period of retirement. However, the results
will depend on establishing appropriate institutions and adopting strategies that contribute
to human and physical capital accumulation.
To counteract the adverse effects of population aging, government use:
 Stimulating the birth rate: activities that help parents reconcile family and
career;
 Promoting healthy aging: changing behavior and lifestyle, shifting the focus
to preventive health care;
 Creating conditions for active aging: the transition from long life to long
working life;
 Increasing productivity: lifelong learning and workplace change;
 Improving of health and social care quality;
 Overcoming inequality: reforms of the social security system.
The most significant contribution to the research of population aging processes was
made by the Polish demographer E. Rosset, who in his monograph “Ageing Process of
Population” proposed a system of indicators for determining the population's level of old
demographic age. The author defined two types of population aging: “aging from below”
16
and “aging from above”: aging “from below” is the result of declining fertility and aging
“from above” results from increasing lіfe expectancy due to the reduction in mortality in the
older age groups in terms of low birth rate (Rosset, 1959).
Proportion of people aged 65 and older from total population in 1960, 2000
and 2019, %
30
25
20
15
10
0
y
nd
en
lia
o
ne
nd
ey
ce
n
ia
n
y
il
a
ba
SA
an
ic
in
l
az
pa
ai
s
Ita
rk
an
ed
ra
la
ai
la
Cu
ex
ni
U
Sp
Ch
m
Br
Ja
Tu
kr
ai
Po
st
Tu
Fr
Sw
M
er
Th
Au
U
G
1960 2000 2019
Figure 4. The proportion of people aged 65 and older from the total population in different
countries of the world in 1960, 2000, and 2019, %
Demographic aging is developing in various countries around the world. This

process is progressing to some extent in Latin America, the Caribbean, Asia, and Oceania.
At the same time, the proportion of older people in North America and Africa remains
relatively stable. According to UN estimates, over the past 20 years, the world's share of the
population aged 65 and over has increased by an average of 1.4% each year. The main
reason for this, experts say, is the increase in life expectancy in old age that is “aging from
above”. It happens because preserving lives in old age contributes to the rise in the absolute
number of older people and their share in the upper part of the sex-age pyramid. And
according to UN experts, the country's population is considered old if people over 65
exceed 12 %.
Chіna іs the most populated country globally, which leaves its mark on all aspects of
society, and, above all, is reflected in the peculiarities of demographic policy. The
population of China is over 1.4 billion people. This country is one-fifth of the world's
population. But due to the low bіrth rate, the state has faced the problem of population
aging; the share of the elderly is growing from year to year (Figure 4).
Ukraine is one of the countries with a relatively high level of population aging. In
contrast to Western countries, where aging occurs “from above” due to declining mortality,
Ukraine's aging rate is growing only “from below” due to high adult mortality and declining
17
birth rates.
Gender and age pyramids are used to study the ratio between different age groups of
men and women in countries or regions. The left and rіght sides of the pyramid reflect
information about the population of different genders. Horizontally, the number of people in
a particular age group is put on the pyramid, and vertically, the value of age intervals is set.
World Population Pyramid in 1950, % World Population Pyramid in 2019, %
100+ 100+
90-94 90-94
80-84 80-84
70-74 70-74
60-64 60-64
50-54 50-54
40-44 40-44
30-34 30-34
20-24 20-24
10-14 10-14
0-4 0-4
8 6 4 2 0 2 4 6 8 5 4 3 2 1 0 1 2 3 4 5
Male Female Male Female
Figure 5. World Population Pyramid (1950, 2019).
Source: Population Pyramid, 2019,
Gender and age pyramids of the population in different countries have various forms
depending on the demographic processes. In countries with high birth rates, the shape of the
pyramid is correct: a broad base and a gradual narrowing to the top. For countries where the
population is aging, the pyramid takes the shape of a bell. This form may become more
complex under the influence of other social processes. Gender imbalance is a difference
between males and females in a population. As mentioned above, males typically equal
females at birth but subsequently experience different mortality rates due to several
potential causes such as differential natural death rates, war casualties, and deliberate
gender regulation.
The world's number of men and women is nearly the same, while men have a slight
lead wіth 102 mеn for 100 women (in 2018). More specifically, 504 of the 1,000 people are
men (50.4%), and 496 are women (49.6%). One hundred six boys are born for every 100
girls, but males have a greater chance of dying than females, both in infancy and adulthood.
According to Figures 4 and 5, the age structure of the world has changed significantly in
recent years. The share of children has decreased substantially, and the percentage of
18
retirees has increased. The ratio of men and women remained almost unchanged. But the
aging process can be seen in all countries of the world but at different rates. It is necessary
to study the demographic processes that have an impact on this dependence.
China Population Pyramid in 1950, % China Population Pyramid in 2019, %

100+ 100+
90-94 90-94
80-84 80-84
70-74 70-74
60-64 60-64
50-54 50-54
40-44 40-44
30-34 30-34
20-24 20-24
10-14 10-14
0-4 0-4
8 6 4 2 0 2 4 6 8 6 4 2 0 2 4 6
Figure 6. China Population Pyramid (1950, 2019).
The total population of China is 1.4 billion people, of which 34 million more men
than women. The most significant gender gap is observed among people of marriageable
age: according to the UN, in 2018 in China, there were 280 men for every 100 women aged
15 to 29; that is, the sex ratio was three to one, this gap will take several decades to close.
Gender imbalances result from past birth restrictions, under which most families could have
only one child. According to Chinese tradition at the time, the birth of boys was considered
better than girls. Because the boys were the family's descendants and stayed to take care of
their parents, the girls usually moved to the husband's family after marriage.
However, concerning Ukraine, like most European independent countries - the
former Soviet republics, the main reason for the high rate of population aging over the past
two decades is the unprecedented decline in fertility and stagnation of life expectancy in old
age at a low level. In this case, the decrease in the absolute and relative number of young
contingents leads to narrowing the sex-age pyramid in its lower part (“aging from below”)
and a corresponding increase in the close number of older people without increasing their
absolute number.
There are almost three million more women than men in Ukraine. As of 2018, there
19
are 17 million 28 thousand men and 20 million 9 thousand women. Women predominate in
the number of men in almost all age groups. Simultaneously, among people aged 14-24, the
male population outnumbers the female population by 104,000.
Ukraine Population Pyramid in 1950, % Ukraine Population Pyramid in 2019, %

100+ 100+
90-94 90-94
80-84 80-84
70-74 70-74
60-64 60-64
50-54 50-54
40-44 40-44
30-34 30-34
20-24 20-24
10-14 10-14
0-4 0-4
8 6 4 2 0 2 4 6 8 5 4 3 2 1 0 1 2 3 4 5
Figure 7. Ukraine Population Pyramid (1950, 2019).
The most considerable significant difference in the number of men and women is
observed in the age group of 65 years and older. Thus, among the elderly, women are almost
twice as many as men: 4.149 million women against 2.099 million men. The іmbalance
between the number of men and women in Ukraine is the high level of male employment in
dangerous enterprises, which is the cause of higher morbidity and mortality, and military
action in eastern Ukraine, where most of the army is men.
3.2 Analysis of the main demographic indicators
The demographic situation in the world or country is characterized by birth rate

indicators, mortality, natural growth, gender and age composition, and average life
expectancy of the population.
3.2.1 Population size and growth
One of the most pressіng problems of modern humanity is population, primarily

associated with accelerated population growth. According to the most recent US Census
Bureau world population projection from June 2019, the total global population is
7,577,130,400 inhabitants, up from 7.2 billion in 2015. The population is located very
unevenly—placement factors: natural and geographical, historical, socio-economic, and
20
demographic.There are five main areas of accumulation:

 East Asian (China, Japan, Republic of Korea, North Korea);
 Southeast Asia (Indonesia, Malaysia, Thailand);
 South Asia (India, Bangladesh, Pakistan);
 European;
 North American (Atlantic coast of the USA and Canada).
Table 3 World Population by Continents, people, 2020
Name 2020 Population World Population Growth Rate Population Density

Asia 4,641,054,775 59,54% 0.86% 104.11
Africa 1,340,598,147 17,2% 2,49% 44.24
Europe 747,636,026 9,59% 0.06% 33.78
South America 430,759,766 5,53% 0.83% 24.15
North America 368,869,647 4,73% 0.62% 14.93
Oceania 42,677,813 0.55% 1,31% 5.03
Source: United Nations, 2019
The global population growth rate in 2018 was 1.12 percent. Since the 1970s, the
population growth rate has been decreasing every five years. The world's population will
continue to increase, but at a much slower pace. By 2030, the world's population would
have surpassed 8 billion. By 2040, this figure would have risen to over 9 billion people. By
2055, the population would have surpassed 10 billion. The growth of the human population
will be attributed to a high rise in the birth rate in Asia and Africa's poorest counties, which
will seriously complicate the fight against poverty and inequality, continue global migration
and urbanization cycles, and intensify population aging in the world's most developed
countries. Summing up, it should be noted that such population indicators as the level of
birth, fertility, mortality, migration, and standard of living, reflecting a close relationship
with the state of the economy of regіons and individual countries of the world. Population
aging has a significant effect on the population's ability to support pensioners. One of the
key findings is that the age group over 60 will increase significantly in most countries. This
puts significant pressure on young age groups, who need to support themselves and their
children and the growing aging population.
China is known to be the country with the largest population globally, which is
growing every year. In 1949, for example, it was 541.67 million population, and by 1969, it
had risen to 806.71 million. To avoid a demographic boom, the government initiated the
One Family, One Child scheme in 1979. The birth rate started to decrease steadily due to the
steps taken and the adoption of a population replication model that accounts for low birth
21
rates, low fertility, and low population growth.

The average population density in China is about 133.2 people / km2. The
distributed population is very uneven. More than 80% of the population lives in the middle
and lower reaches of the Yellow River, the mouth of the Yangtze River, the Pearl River
Delta, the plateau of Sichuan Province, some parts of Northeast China. The population
density is 400-600 people / km2, including in the Shanghai region - about 2 thousand
people, Beijing - more than 580 people. Rarely populated northwestern part of the country:
in Tibet, the population density is only two people / km2.
Population in China, 1950-2019

1,600,000,000
1,400,000,000
1,200,000,000
1,000,000,000
800,000,000
600,000,000
400,000,000
200,000,000
0
50
53
56
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Population in China, people
Figure 8. Population in China 1950 - 2019
Source: World Bank, 2019

There is active population growth in the world, but in Ukraine, the population is
continuously decreasing. In Ukraine, the death rate prevails over the birth rate. The
demographic crisis, the preconditions of which dates back to Soviet times, fully manifested
itself in 1993-1994. And although, due to the improvement of the economic situation and
the introduction of government measures to stimulate people, the negative demographic
trends have decreased somewhat, however, depopulation and aging of the population in the
country. As a result, the number of people in this country has reduced by more than 10%.
Widespread migration was added to the high mortality rate.
The demographic crisis in Ukraine is deepening. In 2018, according to the State
Statistics Service, the population of the country decreased by approximately 170 thousand
people. The cause of depopulation is an increase in emigrants and a catastrophic decline in
birth rates. According to the mentioned department, during January-October 2017, 306,372
children were born in Ukraine. During the same period in 2016, 332,194 children were
born. That is, for the year, the figure decreased by 25,822 people.
22
Population in Ukraine, 1950-2019

60,000,000
50,000,000
40,000,000
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Population in Ukraine, people
Figure 9. Population in Ukraine 1950 - 2019
The average population density of Ukraine is 77 inhabitants per 1 km2, but it is

unevenly distributed. The highest total density is in the industrially developed eastern part
of Ukraine and the western border. The lowest population density in the north and south of
Ukraine, due to natural conditions.
3.2.2 Life expectancy
The average life expectancy or life expectancy of a person is one of the most
important demographic indicators, which shows the population's mortality rate. Since the
19th century, the average life expectancy in the world has constantly been increasing,
especially in some countries that are “aging.”
World Life Expectancy, years
80
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World Life Expectancy, years
Figure 10. World life expectancy in 1950- 2019.
In the last few years, the global life expectancy has increased, raising the general
23
population's life expectancy at birth to just 70 years. The predicted global life expectancy is
expected only to continue to rise to almost 77 years of age by 2050. Significant factors
influencing the life expectancy results include estimates of the potential to reduce the effects
of AIDS/HIV and reduce the infectious and non-communicable disease rates. The weakest
progress has been recorded in Africa. Experts attribute this to the HIV / AIDS epidemic in
many countries of the continent. The lowest life expectancy is in African countries, less 55
years.
Life expectancy at birth by country in 1960, 2000, 2018, total (years)

90
80
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y
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1960 2000 2018
Figure 11. Life expectancy at birth by country in 1960, 2000, 2018, total (years)
Source: Population Pyramid, 2021
The most significant increases were registered in China, where the average life
expectancy increased by 30 years to 72. Improvements in measures are linked to advances
in health, better nutrition, and better working standards. In 1949, life expectancy was 35
years; in 1957- 57 years; and in 2018, it was 77 years. Women in China have a life
expectancy of 77.73 years, while men have a life expectancy of 73.38 years.
In Ukraine, life expectancy rose from 61.8 years in 1950-55 to 70.6 years in 1985-
1990, then fell to 67.5 years in 2000-2005 before rising to 71.8 years in 2015-2020. That is,
today, Ukrainians live on average ten years longer than in the 1950s. Already in 2025-2030,
this figure will be 73.2 years, and by the end of the century will rise to 82.8 years. In
Ukraine, women now live an average of 77 years, men - 67. Life expectancy in Ukraine has
increased in recent decades but remains the lowest in Europe.
3.2.3 Fertility trends
The possibility of depopulation is pushing many countries' policymakers to pay
24
more heed to the demographic mechanism as the primary determinant of population

reproduction mode.
World birth rate, crude (per 1,000 people)

40.00
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World birth rate, crude (per 1,000 people)
Figure 12. World birth rate, crude (per 1,000 people)
The birth rate is a demographic indicator of the number of births per year per 1,000
inhabitants to the average population. And it is the main factor on which the reproduction
regime of the population depends. And its reduction is the determining cause of the
emergence and deepening of the depopulation process. Falling birth rates in terms of
demographic transition is a global process common to all countries. The total birth rate in
the world is 18.1, which has halved since the 1960s.
The evolution of the family institution, the transition from the conventional
patriarchal rural family to urban households, individualism, inclusion in social
development, and the state system of social security are the primary reasons for the
decreasing birth rate globally. Another theory is that women's positions in society are
changing, such as their involvement in social work and a reduced emphasis on domestic
responsibilities. Fewer children can be seen as a deliberate decision made by the modern
family to preserve a certain degree of material stability while providing better care, health,
and education to their children. Women have more chances to engage in work and social life
as a result of their reduced family size, which allows them to pursue their career goals.
There are 17 countries from different sides of the world, projected to see more than
half of their population. As a result of these global trends, Japan's population is expected to
drop from a high of 128 million to under 53 million by the end of the century. Italy is
predicted to see a similarly drastic population drop over the same timeframe, from 61
25
million to 28 million.
Birth rate, crude (per 1,000 people)

50
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40
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1960 2000 2018
Figure 13. Birth rate, by country in 1960, 2000, 2018, crude (per 1,000 people)
Source: Population Pyramid,2019
Rapid demographic change in African countries promises excellent opportunities but

also poses new challenges. Thus, the continent needs an additional millions of skilled
workers in health and education. There are currently 1.2 billion people in Africa. By 2050,
the continent's population will double to 2.5 billion. By 2030, there will be 170 million
more children living in Africa than there are now.
China, the world's most populated country, is projected to peak at 1.4 billion in four
years before halving to 732 million by 2100. India will take this position (Gallagher, 2020).
In 1979, the Chinese government introduced a nationwide “one family, one child” policy.
Economic incentives supported this policy. Families who agreed to have only one child
received subsidies from the government until the child reached a certain age.
Simultaneously, for the birth of an “unauthorized” child, economic sanctions were imposed:
an additional tax on parents, which increased as new children appeared, full payment for
education and treatment, etc. This program, however, worked poorly in the countryside,
where the child was born quickly became involved in the production process. With low
costs for the child, his appearance was economically justified and rationale for a low-
income family. China has made unquestionable success in regulating population growth:
tough economic sanctions have reduced the total fertility rate, which characterizes the
average number of births per woman in a lifetime, from 6 in the 1960s to 1.8 in 2000. In
2018 birth rate in China is 11.930 births per 1000 people.
26
In Ukraine, the birth rate situation has a long history. From the 1960s, birth rates in
Ukraine were relatively constant for a long time. The overall ratio was about 2.0, which was
higher than many developed European countries' equivalents. In the 1990s, a dramatic drop
in birth rates happened. The reason for this process is a reduction in the quality of living
conditions and the resulting lack of prosperity. In addition to mainly economic factors, there
are a number of other reasons that contributed to the rapid fall in birth rates nowadays.
Firstly, in the 1980s the government continued to follow an active agenda aimed at assisting
families with children, and it was around this period that the last increase in birth rates
occurred. And by now, the birth rate in Ukraine has decreased by half since 1960.
Furthermore, Ukraine's birth problem is accompanied by a rapid decline in population
health, including reproductive health, elevated mortality, and decreased life expectancy,
which is not seen in developing countries. As we can see, the policy of influencing the birth
rate through certain levers of influence of the state does not have a long-term effect and
only leads to spending budget funds on welfare programs for young families and
encouraging childbirth. This is having a short-term impact and does not solve the problem
of depopulation. For example, a sharp increase in benefits in Ukraine in the early 1980s led
to a short-lived surge in birth rates, but it stopped very quickly.
Roughly speaking, economic stimulation realizes the reproductive need that has
already developed in people due to socio-cultural and mental factors. It is almost impossible
to influence it by financial measures. Such measures can only increase the speed of
realizing the need that has already been developed in a shorter time. But there are also
methods to stimulate the birth rate. The experience of the Nordic countries shows that
tangible progress can be made in maintaining the birth rate. These are some of the important
sectors to create conditions that allow a woman to combine her employment and her
reproductive function, especially by including men more in child care at a young age. The
results of such a policy are very positive. Countries that follow this path are succeeding in
increasing birth rates and improving family relationships. The latest demographic policy
should be aimed at forming a new value base in society for demographic behavior based on
family, children, and gender equality priorities.
3.2.4 Death rate
The death rate is a numerical ratio that measures the number of deaths per 1,000
people in a given year. One of the most basic demography factors is population death,
which is an important measure of a country's, region's, or city's overall health and quality of
27
living. Since the middle of the XX century, it is almost invariably used as one of the
essential factors in the classification of countries by living standards. With the development
of medicine, science, and rising living standards, the mortality rate decreased from 17,7 per
1000 people in 1960 to 7,7 per 1000 people in 2018. The countries with the highest
mortality include Lesotho (15.40), Lithuania (15.00), Bulgaria (14.60), Latvia (14.60),
Ukraine (14,0), Serbia (13,5), Russia (13,4), Belarus (13,1), Estonia(12,9), Hungary(12,9).
World death rate crude (per 1,000 people)

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World death rate crude (per 1,000 people)
Figure 14. World death rate crude (per 1,000 people)
Mortality as a final indicator of population health depends on many factors,

particularly on living conditions, the environment, access to government social protection,
and behaviors that affect health, mainly smoking, alcohol consumption, and physical
activity.
Annual crude mortality rates were higher in men than women between 2004 and
2016 in China. From 2004 to 2016, the percentage of men and women dying of untreated
noncommunicable diseases rose by 5.58 and 5.11 percent, respectively. For infectious
disorders, the balance had decreased by 1.63 and 2.31 percent in men and women,
respectively. In 2016, men and women died at a rate of 86.81 and 89.13 percent due to
untreated noncommunicable diseases, respectively, with infectious diseases accounting for
3.55 and 3.47 percent. Malignant neoplasm, cerebrovascular disease (CVD), heart disease,
Chronic Obstructive Pulmonary Disease (COPD), and accidental injuries were the top fіve
causes of death in men and women, respectively, accounting for 81.24 and 78.50 percent of
deaths across both causes. Men had higher rates of malignant neoplasm, CVD, COPD, and
28
accidental injury mortality than women. Male mortalіty rates were higher than female
mortality rates in all age ranges. Accidental injury, perinatal conditions, and congenital
abnormalities were the main causes of death in the age range 0–14. Males aged 45–64 years
had 2.16 times higher mortality rate than females for all causes of death. In 2018, the
highest mortality by the region in China was in the northern areas and the city of
Chongqing, which are also associated with natural conditions and industry. The lowest
mortality rates are in central China and the major cities of Beijing and Shanghai (Zhu,
2019).
Since independence, Ukraine has seen a significant increase in mortality rates for
both men and women. By the beginning of the war, Ukraine lost 80 people per hour, which
meant the shameful second place in the world in terms of the number of deaths per thousand
people (15.72 in 2014). The state ranked between South Africa (17.49) and Lesotho (14.91),
while the EU average was about ten people. In 2018, 70% of deaths from the past fate
became due to the blood circulation system's degradation. From such ailments, 387
thousand Ukrainians died. Most people died because of atherosclerotic or ischemic diseases
of the heart. Oncology is another place among the causes of mortality. Death was often
detected through a new solution in the organs of the disease, breast cancer, and stomach
cancer. More than 30 thousand people died due to the detachment, injuries, and the first
time officials. Twenty-four thousand deaths became due to the damage of organs of
persecution. Among them, the most frequent bureaucrats are sick of the stove, the creeper,
and the deterioration of the furnace with alcohol. The cause of 20 thousand deaths was not
blamed. In 2018, the highest mortality rate was observed in the northern regions of Ukraine
and Kyiv, and it is 17.4 deaths per 1,000 population. These statistics confirm the detrimental
impact of the Chernobyl disaster on the health and lives of Ukrainians. The lowest mortality
rates are in the west of Ukraine, which is again confirmed by the country's better
environmental situation.
Due to rising death rates, aging is not as extreme in Ukraine. However, aging rates
are on the rise, and given the country's low retirement age compared to other countries, the
need to change it is unavoidable, especially for women. As a result, other approaches and
population management concepts must be used to solve the new state's social and economic
problems. It is too difficult to choose a new approach. After all, any proposal that considers
the needs of both main players in demographic politics, the state, and the population, has a
better chance of succeeding. For example, the state has a long-standing interest in
increasing the number of citizens in order to increase the labor force, taxpayers, and army
29
size. Simultaneously, during a demographic change, a family may prefer to reduce the
number of children in order to improve opportunities for material welfare, better education,
and more careful upbringing of each child.
There are at least two ways to solve the interests of the state. The first is to
encourage migration replenishment; the second is to tap into the population's internal
resources to improve its quality of life, including intellectual capacity, a healthy and active
lifestyle, and increased economic productivity. It is possible by increasing of population's
life quality and keeping older people employed. Only the elderly's health and productivity
allow the government to get an excellent result in the demographic policy. As a result, Japan
passed a special law on the aging social policy that governs jobs and wages so that everyone
in the population can reach their full capacity and, if needed, work even in old age.
30
4 Pension fund management in China and Ukraine

4.1 Pension fund legislation
The legislation regulates all state processes in the countries of the world. Providing
pensions to citizens is no exception. According to the characteristics of each state, the
number of laws and their essence is different. Compliance with the law is monitored by
certain state bodies that have the authority to do so. The formation of the state pension
system is the result of a social agreement to implement an effective social policy of the state
in the field of pension provision of citizens, the features of which determined by the
influence of political, economic, social factors, as well as the national mentality and cultural
views and customs of society.
Owing to the decentralized structure of the Chinese economy, the Chinese pension
system is widely fractured. The vast number of people who should be insured, the size of
the informal labour market, and the long history of municipal pilot projects or
demonstration schemes for the implementation of social pension systems that have not been
repeated at the national level for various reasons. Consequently, funding, governance, and
parameters are often established at the regional or local level. Several government agencies
in China are involved in regulating the pension process. The highest controlling body is the
ministry. The Ministry of Human Resources and Social Security (MOHRSS) oversees the
operation of supplementary pension schemes. But the development of programs and the
procedure for issuing pensions is carried out by the National Social Security Fund (NSSF).
The NSSF was founded in 2000 as a long-term strategic contingency fund to satisfy the
Basic Old-Age Insurance system's potential pension payments. The NSSF is a central
government agency at the ministerial level and includes the National Council (board), three
committees, and nine management departments.
A unified pension system has been created in Ukraine. It is manifested primarily
because the payment of pensions to almost all categories of pensioners is carried out at the
expense of the Pension fund of Ukraine and, in part, subsidies from the State budget, which
are allocated for pensions. The unified system provides for centralized legal regulation,
which guarantees equal conditions and norms throughout the country, equal opportunities
for citizens of Ukraine. The current form of the pension system of Ukraine has been
operating since 2004 and formally consists of three levels of pension provision and is
regulated by such laws:
1. Law of Ukraine “On Mandatory State Pension Insurance.” Revision on July 3, 2020;
31
Chapter 4. Pension fund management in China and Ukraine
2. Law of Ukraine “On Non-State Pension Provision.” Revision on July 3, 2020;

3. Law of Ukraine “ On Pension Provision.” Revision on January 23, 2020;
4. Law of Ukraine “On Status and Social Protection of Population Suffered from
Chornobyl Catastrophe.” Revision on August 9, 2019;
5. Law of Ukraine “On Pension Provision of Military Men, Persons of Senior Staff and
the Ranks of Bodies of Domestic Affairs and Some Other Persons.” Revision on July 3,
2020;
6. Resolution of the Cabinet of Ministers of Ukraine “Some issues of pension provision
of citizens” Revision on January 18, 2018.
The main law in the regulation of pensions is the Law of Ukraine “On Mandatory
State Pension Insurance,” which outlines the general model of the pension system and
establishes the conditions for the meaning and mechanisms of indexation, recalculation of
insurance pensions.
4.2 Pension fund activity
The pension fund is one of the state institutions whose primary purpose is to provide
people with social security. In particular, this governmental body is intended to provide
financial support to people who have lost their capacity to work for different causes and are
unable to provide for themselves; funds for this type of financial assistance come from
public finances. This institution's operating structure is linked to the help of the material
wellbeing of citizens in the old-age social group. Around the same time, the young
generation which is beginning to work should give their contribution to the pension fund.
Elderly people, on the other hand, get paid as a set monthly amount because they are unable
to support their life needs without government help.
The requirement to uphold the adequacy, accessibility, sustainability, fairness,
predictability, and reliability of pension payments, while delivering outcomes that boost
healthcare in a way that correlates to the current and planned condition in a given country,
are the key conditions for “good pension reform,” according to the World Bank (Holzmann,
et al., 2008):
 An effective scheme offers ample incentives to deter poverty among the elderly
in the general population, as well as a stable means of even consumption during life for the
vast majority of the population;
 an affordable system is one that satisfies individuals' and society's financial
capacities, does not result in the unjustified loss of other social or economic needs
(expenditures), and does not have unfavorable budgetary implications;
32
 a stable system is a financially stable system that can be maintained in the

foreseeable future according to several reasonable assumptions;
 a fair system is a system that ensures the redistribution of income between the
rich and the poor according to social preferences in a way that does not burden the rest of
the members of society who are not members of the system; such a system provides the
same payments with the same contributions;
 the system provides estimated benefits when:
• the formula for calculating benefits, established by law and not left to the
discretion of politicians or government officials,
• the formula of certain payment should protect a person from inflation and
listening to the dynamics of wages before retirement, as well as investment policy in
the accumulative system with certain contributions that protect participants from the
negative impact of significant assets before retirement before life;
 A reliable system is a system that can withstand significant shocks, including
those caused by economic, demographic, and political fluctuations.
The one-child policy combined with enhanced longevity of the population means
that the nation is now in a rapid demographic transition phase towards an aging society. The
Chinese Government, seeking to create a sustainable national pension system, began to
enact reforms with the following objectives:
 to shift the burden of pension provision from the state only to employers and
employees together with the state;
 to expand pension coverage to all urban workers;
 to move from pay-as-you-go (PAYG) financing to a combination of PAYG
and funded systems;
 to encourage the development of private-sector voluntary pensions (National
Council for Social Security Fund, 2020).
In China, the three-pillar pension system is presented. The mandatory first pillar is
based on the NSSF. It is divided into two parts: the social pool and an individual account.
Employers finance the first phase, which operates on a pay-as-you-go basis. The second tier
of pillar I is run as entirely funded individual accounts, which were initially funded by 8%
contributions from businesses and 3% from individuals. A voluntary complementary private
savings plan is the third pillar. This foundation is about those who want to make sure they
have a better pension benefit when they retire.
33
Pillar III
Individual Voluntary
Savings Private Sector
Pilar II
Enterprice
Annuity
Pillar I
Tier I: Social Pool Statutory

Tier II:
Individual account
Public Sector
National Social Secutity Fund
Figure 15. Structure of the Chinese pension system
Source: Salditt, et al., 2007

Ukraine has a mandatory social security system that provides old-age, disability, and
survivors’ pensions to all eligible citizens, with a combination of contributory benefits for
those meeting the minimum qualifying period and social assistance for others. 92% of
pensioners in Ukraine receive pension support from the state (ILO, 2017). Ukraine's pension
scheme is also divided into three tiers. The new solidarity scheme, which pays basic
pensions, is the first step. Pensions are charged to retirees by contributions received from
current employees. The Pension fund provides personalized accounting for the payment of
contributions, accumulates contributions in individual accounts, and assigns and pays
pensions. The number of deductions for an individual employee will not affect the amount
of their future retirement. This issue is the central contradiction of the solidarity system, and
employees are not interested in increasing and systematizing their contributions to the state
Pension fund. The accumulative scheme of mandatory state pension benefits, which is based
on the concepts of accumulating assets of covered individuals in the Accumulative Fund
and implementing funding of expenditures, is the second stage. The third level is the private
pension plan, which is founded on the concept of individuals, employers, and their
organizations participating together in the establishment of pension savings in order to
receive pension payments on the terms and in the manner prescribed by private pension
legislation (Pension fund of Ukraine, 2021).
34
We can conclude that both countries have a three-level pension system. The first
level is a national pension, which has a very high burden on the budget and is not the very
developed system of the third level - individual pension insurance.
To assess the performance of Pension funds, experts use calculating indicators of
adequacy and sustainability. Indicators of adequacy and financial stability are calculated
based on demographic and economic indicators of a particular state. Adequacy look at
theoretical replacement rates at the point of retirement, while studies on financial
sustainability concentrate on projected spending on pensions as a percentage of the national
output in a future year (Aaron, 2010).
4.3 Pension benefits level
China's pension system covers several levels and types of pensions. By 2019, China has
approved three types of pensions:
1. Enterprise Employee Basic Pension (EEBP): pension from contributions of the
citizen in the form of deductions from a salary. The employee transfers 8% of the amount to
the Pension fund, and his employer pays an additional 20%.
2. Government and Institution Pension (GIP): pensions of officials of state
institutions from reserves of state funds
3. Urban-Rural Resident Social Pension (URRSP): pension of agricultural workers
and unemployed urban residents. These groups receive the minimum maintenance from the
Chinese government.
Average monthly pension and wage in China in 2009-2018
8000
7000 6867.58
6000
5630.75 6193.17
5000 5169.08
4696.67
4290.25
4000 3897.42
2728.00 3483.25 2606.5
3000 3044.92 2157 2353
1721
1511
1200
2000
2251 2482.4
1000 1981
1100
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Average pension RMB Average wage, RMB
Figure 16. Average monthly pension and wage in China in 2009-2018, RMB
Source: National bureau of statistics of China, 2021

The Chinese population has a retirement age of 60 years for men and 50 or 55 years
for women, based on the type of work. A person of retirement age in China must have
35
served for at least ten years to be eligible for a state pension. It should be mentioned that not
everyone above the age of 65 receives a pension.
As we can see, the average pension is growing, but the size of the pension for the
elderly in large cities is still small. The Chinese government compensates for this by
providing free services to retirees in various fields.
The Ukrainian pension system, like the Chinese one, has several levels and types of
pensions. Pensions paid by the state to citizens of Ukraine by the Law are divided into labor
and social. In Ukraine, there are few types of pension benefits: old-age pension, disability
pension (including injuries), survivor's pension. The pension that concerns the provision of
the elderly is Old-age pension. The Law of Ukraine "On Mandatory State Pension
Insurance" defines the following conditions, the fulfillment of which gives the right to
receive an old-age pension (Law of Ukraine , 2020):
 insurance experience of at least 15 years;
 age - after reaching 60 years.
Table 4. New insurance policy in accordance with the years in Ukraine
Year Insurance period required to receive a pension
Person age
After 60 years After 63 years After 65 years
2018 No less than 25 years 15-25 years -
2019 No less than 26 years 16-26 years 15-16 years
To retire in 2020 after reaching the age of 60 for men and women 59 years must
have insurance experience of at least 27 years. With each passing year, the length of service,
which gives the right to receive an old-age pension, will gradually increase, and in 2028 the
required length of service will be 35 years.
36
The ban on raising the retirement age has forced politicians to look for other ways to
limit the flow of new retirees. It was made for strengthening the requirements for insurance
experience in determining the right to a minimum pension and the age that gives the right to
receive a pension. As a result until pensioners reach retirement age, their pension will be
equal to the result of the pension formula, i.e., the basic amount of pension without any
subsidies.
Average monthly pension and wage in Ukraine in 2009-2018
9000
8000 7810.88
7000
6000
6273.45
5000
4482.35
4000 2979.46 3149.45
3661.41
1982.63 2479.2
3000
2753.95
1650.43 2370.53 1526.1 1699.5
2000
1000 1581.5 1828.3

1151.9 1253.3 1470.7
934.3
0 1032.6
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Monthly average pension, UAH Monthly average wage, UAH
Figure 17. Average monthly pension and wage in Ukraine in 2009-2018, UAN
Source: State Statistics Service of Ukraine, 2021
If a person does not have the required length of service at the time of reaching the
specified retirement age, he/she will be able to retire later, after reaching 63 or 65 years of
age. If a person continues to work officially and acquires the necessary insurance
experience, the pension can be granted immediately after its acquisition. If a person does
not have the necessary insurance experience to receive an old-age pension after the age of
60 and 63, a pension can be received after the age of 65. But this requires at least 15 years
of insurance experience. The length of insurance, which gives the right to a pension, is
determined on reaching retirement age. At the same time, the government focuses on
keeping the retirement age the same, and a person can choose at what age he will be able to
retire. The possibility of choice, in this case, is quite doubtful. Adults will no longer be able
to make significant changes to their careers. Given the increasing length of study, young
people will not have time to earn 35 years of experience before reaching 60.
The main indicator for determining adequacy is considered to be the coefficient of
salary replacement by a pension. The average pension replacement ratio is measured as the
ratio of the average pension to the average insured income and shows how the scheme
copes with the replacement of earnings by pension benefits.
37
The size of the pension is growing every year but remains insufficient for the normal
life of Ukrainian pensioners. Still, the pension system of Ukraine covers pensions for almost
all older adults. A standard indicator of the level of pensions is the replacement ratio, i.e.,
the ratio of the average pension to the average wage. According to the norms of the
International Labor Organization, it must be at least 55%.
Table 5. Replacement rate in China and Ukraine 2009-2018
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
China 40.32 39.41 43.38 44.16 46.17 45.93 43.55 41.79 40.08 37.95
Ukraine 47.1 44.6 49.3 53.4 51.2 50.2 46.4 40.8 34.9 29.8
When evaluating the pension system adequacy in response to changes, it's important
to remember that past generations of employees received different salary deduction
requirements. As we can see from the table, pensions do not fully cover and do not provide
the standard of living that was before retirement, and the ratio after 2012 tends to decrease.
4.4 Pension fund contribution
The source of revenue of the Pension fund is national payments. Notable

contributions and taxes play a leading role in the budget. Their size is set following current
legislation. Pension funds' assets are defined as assets got from contributions to a pension
plan for the exclusive purpose of financing pension plan benefits (OECD, 2020).
The sources of formation of the Pension fund in the solidarity system are insurance
premiums on state-mandated pension insurance, investment income received from
investment of the reserve of funds, funds of the State budget and trust funds, the number of
financial sanctions and administrative penalties, charitable contributions of individuals and
legal entities, voluntary insurance premiums under the agreement on voluntary
participation, etc. Fundraising for the solidary pension system is carried out centrally, which
provides simplification enforcement procedures for payers and control by the state regulator
and efficient application of measures to influence violators.
Pensions in China differ in size from province to province. The amount of pension
payments in various Chinese regions and cities is determined by local income levels,
population, and government subsidies. China is to reform the dual-track urban pension
system. Currently, corporate employees contribute 8% of their salary, and employers
contribute 20% to the system, and government employees contribute none of their salaries.
Table 6. Individual Income Tax rates in China
Grade Monthly taxable income Taxe rate (%)
38
1. Less than CNY 1500 3
2. The portion of income in excess of CNY 1500 to 4500 10
7. The portion of income in excess of CNY 80000 45
A single contribution to obligatory state social insurance is the mandatory payment

to the compulsory state social insurance system, made in Ukraine to provide insurance
payments for the current types of obligatory state social insurance. The single contributors
are employers; self-employed persons are engaged in independent professional activity;
persons are working in elected positions; servicemen and other taxpayers. The contribution
rate to the Pension fund in Ukraine is 22% of accrued wages. According to the Pension fund
forecast, in normal conditions, this contribution guarantees future pensions.
4.5 Financial sustainability in Pension fund
If we talk about the resulting performance indicators of the Pension fund, then the
main budget indicators are traditionally considered. However, the methodology for
assessing the financial sustainability of the Pension fund as a component of the state's
economic system provides several indicators of financial sustainability, reflecting the
relationship of the fund's activities with the country's gross domestic product as its financial
independence.
Indicators of financial sustainability of the Pension fund:
1. Assets of the Pension fund relative to GDP
2. Income and expenses of the Pension fund
3. Deficit/surplus of the Pension fund relative to GDP
4. Share of transfers from the budget in the income of the Pension fund
5. A debt of enterprises, institutions, and organizations for payments to the
Pension funds
It is needed to define these indicators for China and Ukraine.
4.5.1 Assets of the Pension fund relative to GDP
The GDP indicator is used to explain the country's economic development.

Calculating the share of pension fund costs in GDP is used to evaluate the performance of
the pension system. Table 7 shows how significant is the share of Pension fund assets in the
state economy. For ten years (2005-2015), there has been an increase in this share in China.
39
This is related to a rise in the percentage of retirees that are covered by pensions, as well as
an increase in the amount of financial benefits. The percentage of Pension fund assets
increased by only 0.1% and amounted to only 0.22% in 2015. It can be seen that until 2013
there was a tendency to increase, but due to the political crisis in 2014 and the reduction of
Pension funding, the share began to decline.
Table 7. Assets of the Pension fund relative to GDP
Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
China 0.36 0.41 0.56 0.6 0.72 0.68 0.73 0.89 1.01 1.19 1.36
Ukraine 0.02 0.04 0.05 0.06 0.09 0.11 0.11 0.15 0.17 0.15 0.12
Increased expenditures on pension benefits mean that more people are provided with
pensions and higher pensions, which can ensure a better quality of life for the population.
But only if the economy develops successfully does an increase in pension spending mean
an improvement in the living standards of the population, otherwise it is an increase in the
burden on the state. For example, in 2015, the Pension fund's expenditures to the country's
GDP averaged 11.2% in the EU. And this is a significant burden for the governments of
European countries, so the transition from a solidarity pension system is necessary.
4.5.2 Income and expenses of the Pension fund
To finance the costs, the Pension fund mobilizes its own and transferred revenues.
Own income is income to Pension fund in the form of mandatory and voluntary
contributions of enterprises, institutions, and individuals, income from investments, and
income in the form of financial sanctions.
Income and expenses in Chinese Pension Fund in 2009-2018
60000
50000
40000
30000
20000
10000
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Income, 100 miliion RMB Expences, 100 miliion RMB
Figure 18. Income and expenses in Chinese Pension fund 2009-2018, RMB
Source: National Council for Social Security Fund, 2020

The transferred revenues are funds transferred to the fund from the state and local
budgets and state trust funds. The Pension fund expenses include the following, pension
payments, administrative costs, payment for services of postal enterprises for the payment,
40
and delivery of pensions.

As you can see, in China for all these years, the Pension fund's income exceeds the
costs, which allows you to form a reserve for payments in a period when income is
insufficient. There is a significant deficit of the Pension fund of Ukraine - more than 140
billion UAH, and in this regard, it is impossible to further increase pensions. That the
solidary pension system can not provide decent pensions and the situation can be remedied
only by introducing a funded pension system.
Income and expenses in Ukrainian Pension Fund in 2009-2018

400
350
300
250
200
150
100
50
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Income, biliion UAH Exp, biliion UAH
Figure 19. Income and expenses in Ukrainian Pension fund 2009-2018, UAH
Source: Pension fund of Ukraine, 2021
4.5.3 Deficit/surplus of the Pension fund
Each country in its national budgetary practice uses different indicators of budget
imbalance and independently determines the methodological aspects of their calculation.
The ratio of the budget deficit to GDP primarily reflects public finances, as it shows the
extent of budget imbalances relative to the national economy (Yuri, et al., 2013).
As we can see from Figure 20, the pension fund's deficit does not have a clear trend.
Still, revenues depend on economic stability in the country, economic development and
business incentives, and others.
41
Deficit of Pension fund, %

100
90
80
70
60
50
40
30
20
10
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Deficit of Pension fund, %
Figure 20. Deficit of the Pension fund in Ukraine relative to GDP in 2009-2018, %
Source: Pension fund of Ukraine, 2021

There are many reasons for the shortage of funds in the Pension fund. In 2017, the
Accounting Chamber analyzed the reasons for forming the Pension fund budget deficit and
its coverage from the state budget. In particular, it was noted that in 2016, almost halving
the amount of the single contribution to the obligatory state social insurance to 22% and the
abolition of its deductions from wages led to a shortfall in the budget of the Pension fund,
according to his calculations, 96.4 billion UAH. Other reasons for the budget deficit include
low wages, a specific reduction in insured persons and policyholders, the annual incurrence
of irregular expenditures, and increased arrears of state social insurance payments and other
payments to the Pension fund.
4.5.4 Share of transfers from the budget relative to GDP
The main source of income of the fund is still the single social contribution. The
employer pays a single social contribution for each of its employees, which is distributed
among several funds; almost 80% of the SSC goes to the Pension fund. But since these
funds are not enough to pay pensions, the state must allocate subsidies from the budget.
Table 8. Share of transfers from the budget relative to GDP, Ukraine in 2009-2018, %
Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
China - - - - - - - - - -
Ukrain
5.5 6.2 4.7 4.8 6 5.1 4.8 6 3.2 4.2
e
Source: Pension fund of Ukraine. https://www.pfu.gov.ua/
The growing importance of the role of budget funds in the formulation of pension
fund budget revenues and the coverage of its debt may be a major source of budget system
inefficiency. After all, directing substantial amounts of budget funds to cover the Pension
fund's deficit increases the expenditure side of the state budget, requires an increase in
42
revenues, and leads to underfunding of other budget programs. Another negative side of
expanding the role of the state budget in the formation of revenues of the Pension fund is
the growing need for government borrowing. The total amount of public debt is constantly
growing.
4.5.5 Debt of enterprises, institutions, and organizations for payments to the Pension
funds
According to the Pension fund of Ukraine, the indebtedness of enterprises to the

Pension fund is currently not critical. It does not affect the payment of pensions on time and
in full. But every year, due to various reasons, the number of enterprises and the amount of
debt is growing. During the period from 2016 to 2018, the debt increased by 10 billion
hryvnias and in 2018 amounted to 29.1 billion hryvnias (Pension fund of Ukraine, 2021).
4.6 Necessity of the pension reform
The role of pension systems is to provide the population with normal living
conditions after their working age. The world is changing, living standards are rising, and
society is no longer what it used to be. The work of the pension fund under the mechanism,
which was introduced decades ago, is no longer effective. The pension system needs to be
changed, but of course, by radical methods, it is impossible to do so
According to the practice of many foreign countries in a type of the modern process
of population reproduction, the solidarity pension insurance system, even with a high level
of economic development, cannot provide a decent standard of living for retirees. However,
it has both advantages and disadvantages.
The pension system has the following advantages in Ukraine:
 Providing all segments of the population with a minimum income in case of
permanent disability;
 Stability and reliability, relative insensitivity to the impact of various risks,
except for long-term processes (demographic decline, political unrest, etc.).
But there are still more disadvantages and problems that need to be solved:
 No direct relationship between the size of the future pension and the number of
pension contributions;
 The disinterest of employees in extending the length of service;
 No individual pension accounts;
 Lack of possibility to choose an individual scheme of pension contributions;
43
 Inefficient use of the received pension contributions by the Pension fund. Funds
are not invested in profitable financial instruments, as the problem of general population
aging forces all revenues to be directed immediately to current payments to current retirees;
 Vulnerability of the state pension from inflation and devaluation of the Ukrainian
hryvnia against major world currencies.
Although the Chinese pension system is also a solidary pension system, it has a
number of specific advantages and disadvantages. The advantages of the Chinese pension
system are:
 reliability of receiving a basic pension;
 provision of full pensions for civil servants;
 the level of pensions is assigned according to the region's development, the
average regional salary.
Like the Ukrainian pension system, the Chinese one has its shortcomings:
 the pension program does not include all older adults;
 non-provision of pensions for rural residents;
 low level of pension payments;
 reduction of demand for other professions, due to the granting of privileges
to civil servants;
 there are no individual accounts for the accumulation of pension
contributions.
Table 9. China's pension policy (Tao Liu & Li Sun, 2016)
Year Pension plan Targeted Group Pension amount Number of

participants
1955 Regulation for civil servants Civil servants and High 40 million
retirement public sector
employees
1991 Circular extending the Employees in Middle 322 million
reform of the old-age enterprises
pension system to
employees in enterprises
2009 Decision of the State Rural residents Low 463 million
Council on new rural social
pension system
2011 Decision of the State Non-employed Low 35 million
Council on a basic insurance urban residents
for non-employed urban
residents
2014 Ordinance establishing a Urban and rural Low 498 million
unified basic pension system residents
for urban and rural residents
2015 Decision of the State Civil servants and Middle 40 million
Council on pension reform public sector
44
in government and public employees
institutions
But since the creation of the state in 1949, the government has gradually
implemented pension reform, including various population segments. According to Table 9,
it is clear that not all retirees receive a pension in China, but still, the government is
implementing reforms to cover more older people. The need to implement more serious
reforms to the pension system was due to several socio-economic factors, such as the
formation and development of a market economy, forming a welfare state, and responding
to the country's demographic situation adequately. The main goal of the pension reform is to
ensure a decent standard of living for citizens who have paid pension contributions during
their working life without hiding their labor income. Pension reform is aimed at creating
equal opportunities for pensions for citizens regardless of their field of employment and
type of activity to eliminate disparities in the number of pensions. The aging trend has been
driven by the rapid growth of the social system, the shrinking birth rate, and other causes.
The rapid development in medical research and practice in China, as in many other nations,
has resulted in a decline in mortality; the program of birth control has led to a sharp
decrease in the ratio of the working population to retirees. The significant aging of the
population has an effect on both the pension scheme and the national economy. In countries
with an elderly population, the negative effect on the economy has increased. For example,
savings and consumption have decreased; domestic market demand has been limited;
financial pressure has increased. China's aging population would have a structural effect on
economic development, industry structure, national investments, jobs, and other
macroeconomic indicators in the long run.
Ukraine's population will continue to shrink and age, leading to significant changes
in the demographic structure in the coming decades. Pension reform in Ukraine has no
alternative also because in this country and all over the world, the aging process continues,
while our retirement age is the lowest in Europe. One of the main problems today is the
ratio of the number of insurance premium payers to retirees. Even now, one worker keeps
one pensioner, and over time the situation will worsen.
The pension system plays an important role in the economic system of the state. To
perform its proper functions of supporting the unemployed and at the same time have
sufficient funding needs to be developed following modern demographic and economic
indicators. The current state of the pension system shows a high rate of demographic
dependence, a negative trend of decreasing the rate of replacement of wages by pensions,
45
and a reasonably low level of pensions, which in the context of global aging needs to be
addressed as soon as possible.
46
Chapter 5. The impact of population aging on the work of the pension fund
5 The impact of population aging on the work of the pension

fund
5.1 Model description
Many models study the impact of various factors on the work of the pension fund.
But the best model for calculating the effect of population aging in China is explained by
the Huan Wang model.
Huan Wang (2019) has developed a model to study the financial sustainability of the
Pension fund in China and the effectiveness of implementing reforms. In her work, she
mentioned that sustainable pension development is of fundamental importance to socio-
economic development. It has a close relationship with the stimulation of local economies
and government income at a macroeconomic level. To create a model of financial
sustainability, the author first derived the Projection Models of Population.
f f f
P x+1 ,t +1=P x ,t ×(1−d x ,t ) (5.1)
f m
P x+1 ,t +1=P x ,t ×¿ ) (5.2)
49
(5.3)
P f
0 , t+1 =p x ,t × ∑ (P fx ,t ¿ ×b x ,t )¿
x=15
49
(5.4)
P m
0 , t+1 =(1− p x ,t ) × ∑ (Pfx , t ×b x ,t ¿)¿
x=15
where,
x – age;
t – year;
f – women;
m – men;
❑
P x, t – population of age x in year t;
❑
d x ,t – mortality rate at age x in year t;
b x ,t – fertility rate for women aged x in year t;
p x, t – the percentage of births of girls in women aged x in the year t;
ω – age limit.
46
It is also necessary to find the part of the population that pays contributions to the
pension fund:
bm −1 bf −1
(5.5)
Pa , t=( ∑ P + ∑ P x ,t )× ut × et × c t
m f
x ,t
x=am x=af
where,
a – initial working age;
b – retirement age;
ut – level of urbanization ;
c t – level of pension coverage (not used);
e t – employment rate.
And the formula for the number of retired people is:
( )
ωm −1 ω f −1
Pb , t =( P m
bm , t +P f
bf , t ) ×u t ×e t ×c t + ∑ P m
x ,t −1 + ∑ P fx ,t−1 × ut−1 ×e t−1 ×c t −1
x=bm x=b f
(5.6)
Once the population is calculated, we can find the income and expenses of the
pension fund using this formula. Income of pension fund:
I t=W t × ( c 1t + c2t ) × P a ,t (5.7)
where,
W t – the average salary in the year t;
1
c t – corporate tax rate;
2
c t – deductions from the salary of employees in the year t.
Expenses defined as:
Et =W t−1 × r t × δ t × P b ,t (5.8)
where,
W t −1 – the average salary in the year t-1;
r t – the level of salary replacement of pensions;
δt – the annual increase in wages.
47
Based on the model IIASA model, in her study of the impact of population aging on
the development of the state, Katsiaryna Lisiankova generalized the equation for calculating
the performance of the Pension fund in Ukraine (Lisiankova, 2002).
To calculate the pension fund's income, it is necessary to note such parameters as the
amount of wages, the rate of contribution to the pension fund, and the number of the
working population.
ContPubPenSy s ( t , age )=PubPenSysContRate ( t ) ×WageY (5. 9)
where,
PubPenSysContRate(t) – contribution rate from wage defined by the government in
year t;
WageY – average wage in year t.
To obtain the total income of the pension fund, it is necessary to find by
multiplication of the result of the previous equation and the population in a certain age
category.
r−1
ContPubPenSys ( t )= ∑ ContPubPenSys ( t , age ) × Pop ( age ) (5.10)
x=15
where
x – the initial age of the working population;
r – retirement age in year t;
Pop(age) – population in specific age in year t.
To obtain the equation of pension fund expenditures, it is necessary to consider such
indicators as the annual costs per pensioner of a certain age and the number of pensioners.
m
BenPubPenSys (t )=∑ BenPubPenSys(t , age)× Pop(t , age) (5. 11)
r
where
r – retirement age in year t;
m – maximum age;
BenPubPenSys(t, age) – costs per pensioner of a certain age in year t;
Pop(t, age) – population of a certain age in year t.
To find deficits and proficit of the pension fund in year t should be used the formula:
48
BalPubPenSys(t )=ContPubPenSys(t)−−BenPubPensSys(t ) (5. 12)
5.2 A set of scenarios
The scenario is a specific condition under which it is necessary to consider the result
of its implementation. To study the impact of aging on the Pension fund, we have selected
several scenarios related to the birth rate and retirement age.
In Ukraine, the problem of the pension system is the constant reduction of the
population and the deficit of the Pension fund, so for the calculations, we choose the fertile
scenario and the retirement age scenario. According to the opinion of experts, it is the
process of birth rate and increases in retirement age that has a direct effect on the work of
the pension fund of Ukraine. For the analysis, it is necessary to consider a combination of
fertility scenarios and retirement age scenarios; after all, demographic policy always
includes factors.
Table 10. Set of scenarios to analyze Ukrainian Pension System
Scenarios Fertility rate Retirement age

1. Basic The same level The same level
To
2. Optimistic Increases 20% Increases 20%
3. Pessimistic Decreases 20% Decreases 20%
analyze China's pension system, we will consider other indicators, as the country's
demographic factors differ from the situation in Ukraine. China's demographic system has
other processes that we believe affect the work of the Pension fund. Here, unlike in Ukraine,
there is no raising the retirement age, although it will be a necessary measure in the future.
Instead, Chinese society is characterized by a high level of urbanization. Over the last ten
years, the number of cities with millions has grown significantly, while more and more
young people are leaving the countryside. The country is experiencing rapid population
aging due to increased life expectancy. These processes affect the work of China's Pension
fund. Whether this is the case and how much of their impact needs to be investigated
Table 11. Set of scenarios to analyze Chinese pension system
Scenarios Fertility rate Urbanization rate Life expectancy

1. Basic The same level The same level The same level
2. Optimistic Increases 20% Increases 20% Increases 20%
3. Pessimistic Decreases 20% Decreases 20% Decreases 20%
1. Fertility scenarios
49
The birth rate is an important indicator that reflects the welfare of the nation. The
birth rate in the world continues to decline, especially in highly developed countries, which
is accelerating the pace of population aging. The state can influence and pursue effective
demographic policies to increase the birth rate. The methods of demographic policy that
will be designed to increase the number of children:
1) Removal of restrictions for the birth of children (for China);
2) Providing financial support at the birth of children;
3) Assistance to young families in creating all the financial and comfortable
conditions for the birth of children;
4) Improvement of the medical health care system.
So for the calculations, we will choose three birth scenarios for which: first, the
government will leave everything at the same level of support for families; second,
incentive methods for childbirth will be used; third, the number of incentives and support
will be reduced, and families will not be able to raise many children.
2. Retirement age scenario
There is a tendency in the world to increase the retirement age. This action allows
you to fill the pension fund budget with additional funds and delay the payment for a certain
period. For our forecast, we will consider two retirement age scenarios. The first is to keep
the retirement age at the same level. And the second scenario is to increase the retirement
age for both men and women by 20%.
3. Urbanization scenario
Urbanization is a process of increasing the urban population. China is a highly
urbanized country. In 2018, the level of urbanization reached 59.6% and was characterized
by its annual growth. The number of urban residents plays an essential role in China's
Pension fund expenditures, as urban residents first receive pension benefits from the state.
3 Life expectancy scenario
Life expectancy worldwide is growing, but it is a phenomenal transformation in
China, and now the country has become a country of longevity. For comparison, in 1960,
the average life expectancy among Chinese was 43 years; in 2018, this figure was 75.99 and
tended to increase. If the life expectancy of the population increases, then the costs of
maintaining the everyday existence of these people increase accordingly.
These scenarios will allow us to consider various options and predict the impact of
government demographic policy on the work of the Pension fund. However, before
50
investigating the impact of the above factors on the performance of the Pension fund, it is
necessary to test the following hypotheses:
Hypothesis 1: An increase in the share of pensioners leads to a rise in Pension fund
costs.
Hypothesis 2: An increase in urbanization will increase the cost of the Pension fund
in China.
Hypothesis 3 An increase retirement age positively affects the work of the Pension
fund in Ukraine.
Hypothesis 4 An increase in birth rate and retirement age positively affects the work
of the Pension fund in Ukraine.
Hypothesis 5: An increase in birth rate, urbanization rate, and life expectancy has a
positive effect on the work of the Pension fund in China.
5.3 Analysis of the impact of demographic indicators on the income and

expenses of the Pension fund
5.3.1 Hypothesis 1: An increase in the share of pensioners leads to an increase in

Pension fund costs
The demographic burden is a generalized quantitative characteristic of the

population's age structure, which shows the burden on society, not the working-age
population. The age dependency ratio (DR) indicator illustrates the proportion of people of
retirement age compared to people of working age who contribute to the Social Security
scheme by paying premiums to the Pension Fund. There is also an indicator of the Child
dependency ratio. The child dependency ratio is measured as the proportion of the
population who have not yet attained working age to those who have. Both hands
characterize the burden on the working people. The employees maintain schools,
kindergartens for children, and pensions for the elderly at the expense of taxes and
deductions.
Experts note that the demographic situation in Ukraine is deteriorating every year.
This process is due to low birth rates. The age structure determines the demographic burden
and dependency ratio. As of January 1, 2018, 269 people aged 0–15 and 378 people aged 60
and older per 1,000 people aged 16–59. In rural areas, the corresponding figures are much
higher (302 and 396 people) than in urban settlements (255 and 370 people). Compared to
51
2017, the total demographic burden per 1,000 people aged 16–59 in Ukraine as a whole has
increased from 632 to 647 people.
According to statistics, it can be said that China is currently experiencing
demographic change. Rapid population growth has stopped, but new problems have
emerged that need to be solved. For example, over the last ten years, the number of retirees
has increased significantly, and the number of children has decreased. If such processes
continue, it may lead to the fact that by 2050 the share of people of retirement age will be
31%, and only two employees will support one pensioner.
Table 12. Data for the study of the influence factor of population pressure on public spending per
Pension fund
Ukraine China
Year Exp,
Total Child Aged Total Child Expenses, 100
billions Aged DR
DR DR DR DR DR mil. RMB
UAH
2009 0.429 0.201 0.228 165.70 0.366 0.258 0.108 8894.4
2010 0.425 0.202 0.223 191.40 0.365 0.255 0.110 10755.3
2011 0.419 0.202 0.217 210.70 0.366 0.253 0.113 13363.2
2012 0.421 0.204 0.217 233.60 0.367 0.251 0.116 16711.5
2013 0.425 0.208 0.217 250.30 0.368 0.250 0.119 19818.7
2014 0.432 0.212 0.22 243.40 0.372 0.249 0.123 23325.8
2015 0.443 0.218 0.225 265.60 0.377 0.249 0.129 27929.4
2016 0.452 0.221 0.231 253.40 0.385 0.249 0.136 34004.3
2017 0.462 0.225 0.237 291.50 0.394 0.250 0.144 40423.8
2018 0.47 0.227 0.243 358.60 0.404 0.251 0.153 47550.4
It is necessary to investigate the impact of the ratio of retirees to employees on the

work of the Pension fund. The table shows the indicators of the demographic burden in
Ukraine and China for ten years (2009-2018) and the pension fund costs for this period.
To study the model is necessary to investigate its reliability; for this purpose, the
following data were calculated. First, consider the example of Ukraine. Excel software was
used to study the model, as a result of which the following indicators were obtained.
To estimate the closeness of the relationship between factors Xi and the result Y in
this sample, we need to consider Multiple R (Table 13).
The values of the indicator variable in such intervals:
0 ≤ R ≤ 0.3 - weak or no connection;
0.3 ≤ R ≤ 0.7 – medium;
0.7 ≤ R ≤ 1: strong connection.
52
In our case, R = 0.891773801, which means the relationship between the indicators
is close. The coefficient of determination (R Square) for models takes values from 0 to 1.
The closer the value of the coefficient to 1, the better the dependence. When estimating
regression models, this is interpreted as the adequacy of the data model. For acceptable
models, it is assumed that the coefficient of determination should be less than 50%. Our
model's coefficient of determination is 0.7952, which determines the relationship between
the indicators as reliable.
Table 13. Result of the study of the influence factor of population pressure on public spending per
Pension fund in Ukraine
Regression Statistics
Multiple R 0.891773801
R Square 0.795260512
Adjusted R Square 0.736763515
Standard Error 27.59793449 Significance
df SS MS F F
Observations 10
0.00388334
Regression 2 20708.99408 10354.5 13.59489474 2
Residual 7 5331.521917 761.646
Total 9 26040.516
Lower Upper
Coefficients Standard Error t Stat P-value 95% 95%
Intercept -701.492868 231.9293 -3.0246 0.019261 -1249.92 -153.067
Child DR 5286.039304 1488.493028 3.551269 0.009328 1766.313 8805.766
Aged DR -764.957769 1666.471453 -0.45903 0.660127 -4705.54 3175.621
Intercept shows the value of y if our two independent variables are equal to 0. This
number allows us to understand that many other indicators affect the value of y and are not
taken into account in our model. An important indicator for assessing the statistical
significance of the difference of variables is the criterion t-test. Based on our calculations,
we can conclude that it is significant changes in the indicator Child DR because the t -test's
calculated value is higher than the table (1.383), where df = 9, p = 0.1. The opposite
situation with the variable Aged DR. The confidence interval for the coefficient Child DR is
from 1766.31 to 8805.76.
To determine the significance of the model is necessary to consider the Fisher index.
The figure in our case is 0.003883342, i.e., less than 0.05, which means that the model is
significant.
Substituting the obtained coefficients, we get the following equation:
53
y=−701.49+5286.04 x 1−764.95 x2 (5. 13)
where y is Pension fund expenses, x 1 is child dependency rate x 2 is old dependency

ratio.
According to the equation, the greater the burden on the working population of the
younger generation, the higher the costs of the Pension fund, and for pensioners, the
opposite is true. The higher the burden on the working population, the lower the costs of the
Pension fund.
Analyzing the data of China on the same indicators, we obtained the following
coefficients.
Table 14. Result of the study of the influence factor of population pressure on public spending per
Pension fund in China
Multiple R 0.999847
R Square 0.999694
Adjusted R
Square 0.999606
Standard Error 258.5454
Observations 10
Significance
df SS MS F F
Regression 2 1.53E+09 7.63E+08 11417.73 5.04E-13
Residual 7 467920.2 66845.74
Total 9 1.53E+09
Coefficient Standard Upper

s Error t Stat P-value Lower 95% 95%
Intercept -147.654 9340.663 -0.01581 0.987829 -22234.8 21939.5
Child DR -311979 35233.1 -8.8547 4.74E-05 -395292 -228666
Population
above 65 822369 6745.142 6745.142 6.59E-13 806419.3 838318.8
We can conclude that the relationship between the indicators is reliable and close (R
Square = 0.999694, R=0.999847). Fisher indicator is a very small number that means the
model is significant. Based on the initial data for our sample (df = 9, p = 0.05), we can
conclude that the t-test in this table reflects the statistical significance of changes in variable
Aged DR and refutes that with variable Child DR because the calculated value is lower
than the value for our sample. The confidence interval for the coefficient Aged DR is from
806419.3 to 838318.8.
54
Using calculated coefficients, we can make the equation for Pension fund
expenditure in China.
y=−147.65−−311979 x 1 +822369 x 2 (5. 14)
Where x 1- child dependency ratio, x 2- old dependency ratio.

We can conclude that increasing the workload of the young population leads to a
reduction in the costs of the Pension fund. If the people of the elderly increase, it leads to a
rise in the cost of their maintenance. According to our calculations, we can conclude that
our hypothesis was confirmed only in China, where the model is more reliable. There can be
many reasons. One of them is that looking at the demographic processes in the country, in
China, the population is aging more rapidly, and accordingly, the relationship between the
working people and the people of retirement age is more present.
5.3.2 Hypothesis 2: An increase in urbanization will increase the cost of the Pension
fund in China
Urbanization is the process of increasing the share of urban residents and increasing
the city's role in society. Thus, the level of urbanization is the share of urban residents in the
total population.
In the pre-reform period, the process of urbanization in China was very slow. After
the formation of the People's Republic of China in 1949, i.e., at the beginning of the
process, the traditional belief prevailed that the city was mainly industry and trade, and in
the countryside, it was mainly agriculture. According to official data, in 1950-1977, the
urban population grew by an average of 0.25% per year. There were relatively few large
cities, and the network of small towns and villages not only did not increase but declined (in
1953, there were 5,000 of them, and in 1978 - 2,800).
55
Urbanization rate in China and in the world in 1960- 2019
70.00
60.00 55.71
53.91
51.65 60.31
49.15 55.50
50.00 46.69
43.03 44.84 49.23
39.35 41.22
40.00 36.56 37.69 42.52
35.57
33.61
35.88
30.00
30.96
26.44
20.00 22.87
18.09 19.36
16.20 17.40 17.40
10.00
0.00
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2019
China World
Figure 21. Urbanization rate in China and the world in 1960- 2019, %
The process of urbanization in China during the reform period can be divided into
several stages:
 1979-1983 - the initial stage of urbanization, especially in the countryside.
Thus, rural enterprises received the right to use land, manage products, and specific state
support earlier than urban ones.
 1984-1988 - the stage of accelerating urbanization to strengthen the legal and
organizational foundations of the transition to market relations. Simultaneously, foreign
investment in the economy and production potential of front and small cities increased.
 1988-1990 - the stage of the beginning of large-scale urbanization with broad
involvement in the economy of cities of national and foreign capital, the beginning of the
practice of increasing the urban population at the expense of rural migrant workers.
 2000-2020 - a stage of high (on average by 1.2% annually) rates of
urbanization, when the coefficient of urbanization increased from 36.2% to 59.58%.
The rate of urbanization is essential in calculating pensions in China. China Pension
fund provides pensions only to urban residents, so it is necessary to investigate the impact
of such rapid urban population growth on the work of China's Pension Fund.
Table 15. Urbanization rate and Pension Fund Expenses in China (2009-2018)
Expenses,
Urbanization rate 100
Year miliion
RMB
2009 47.88 8894.4
2010 49.23 10755.3
56
2011 51.27 13363.2

2012 52.57 16711.5
2013 53.73 19818.7
2014 54.77 23325.8
2015 56.1 27929.4
2016 57.35 34004.3
2017 58.52 40423.8
2018 59.58 47550.4
Table data and Excel software were used to obtain the model results. The result of
the study of the relationship between indicators is presented in Table16. As we can see from
the calculations, the relationship between the indicators is reliable and close, and the model
is statistically significant （ Multiple R=0.96655 ， R Square = 0.934218 ， F = 5.26E-06.
The value of the t-test for the level of urbanization reflects the statistical significance of
changes in this variable.
Based on the calculations, the equation will be as follows:
y=−149993+3221.28 x1 (5. 15)
As expected, the growth of the urban population in China has a direct bearing on the
cost of the state pension fund and leads to its increase. The findings of the study supported
our theory, and this should be considered when planning a pension scheme in the future.
Table 16. Result of the study of the influence factor of urbanization rate on Pension fund
activities in China
Multiple R 0.96655
R Square 0.934218
Adjusted R
Square 0.925995
Observations 10
Significa
df SS MS F nce F
Regressio 1.43E 113.6
n 1 1.43E+09 +09 1 5.26E-06
12555
Residual 8 1E+08 457
Total 9 1.53E+09
Coefficie Standard P- Lower Upper Lower Upper

nts Error t Stat value 95% 95% 95.0% 95.0%
-
9.1526 1.64E -
Intercept -149993 16388.03 2 -05 -187784 112203 -187784 -112203
Urbanizat 3221.28 302.21 10.66 5.26E 2524.37 3918.18 2524.37 3918.18
57
ion rate -06
5.3.3 Hypothesis 3. An increase in retirement age positively affects the work of the
Pension fund in Ukraine.
The state determines a citizen's retirement age, in which he will pretend for a
pension. However, there is always an apparent effect of change of retirement age on
virtually all aspects of social life, and it can be divided into economic, social, and
administrative.
1. Impacts on the economic sphere:
1.1. Macroeconomic regulation. Raising the retirement age leads to an increase in
income and consumption and, at the same time, a decrease in the level of savings, which
may lead to a rise in the real interest rate and negatively affect economic growth.
1.2. Labor market regulation. Retirement age is one of the most effective regulators
of the labor market. It directly affects the supply and demand of labor and, therefore, acts as
a regulator of production factors. Such influence is exercised primarily through the
legislative establishment of the general retirement age.
2. Impacts on the social sphere:
2.1. Regulation of internal labor migration. By establishing a system of benefits for
specific categories of workers, the state has the opportunity to regulate labor migration in
both geographical and intersectoral contexts, based on the priorities of state development.
2.2. Impact on the demographic situation. An unreasonable, excessive increase in
retirement age for women creates additional barriers for young families to decide the
number of children.
3. Impacts on the administrative sphere.
Table 17. Retirement age and Pension fund income in Ukraine (2009-2018)
Income,
Year Ret age Ret age biliion
man woman UAH
2009 60 55 148.4
2010 60 55 185.7
2011 60 55.5 197.5
2012 60 56 222.6
2013 60 56.5 250.2
2014 60 57 241.8
2015 60 57.5 264.7
2016 60 58 256.6
2017 60 58.5 293.2
58
2018 60 59 353.9
Currently, the self-employment of persons of pre-retirement age is very problematic.
The only way out for most of these people is to register with the state employment service.
If the retirement age is raised, this trend will only intensify. Therefore, raising the retirement
age can be a crucial decision in reducing the Pension fund deficit. As a result, it is important
to examine how the raising of the retirement age impacts the Pension fund's operation.
To analyze the model, the following data were calculated and presented in Table 18.
In this model, R Square is 0.944667, which means that the relationship between the
indicators is very close. Furthermore, significance F is 0.000409, which is an indication that
the model is statistically significant. The value of the t-test is much higher than the tabular
value (1.383) for our sample, which with 90% confidence reflects the significance of the
change in the value of the studied indicators of change in the retirement age of men and
women. The confidence interval for the value of Ret age woman is from 26.21006 to
49.84586. According to these indicators, we can say that the model is reliable and confirms
the hypothesis that the increase in retirement age leads to an increase in Pension fund
income. The equation will be as follows:
y=−1918.53+0 x1 +38.03 x 2 (5. 16)
Increasing a woman's retirement age by one year will increase the Pension fund's
income by UAH 38.03 billion.
Table 18. Result of the study of the influence factor of retirement age on Pension fund activities in
Ukraine
Multiple R 0.944667
R Square 0.892396
Adjusted R
Square 0.861652
Observations 10
Significa
df SS MS F nce F
29.026 0.00040
Regression 2 26971 13485.5 7 9
3252.1 464.589
Residual 7 26 4
30223.
Total 9 12
Coeffici Stand t Stat P- Lower Upper Lower Upper
59
ard
ents Error value 95% 95% 95.0% 95.0%
- 283.95 0.0002 -
Intercept 1918.53 64 -6.75642 63 -2589.98 1247.08 -2589.98 -1247.08
Ret age #NUM
man 0 0 65535 ! 0 0 0 0
Ret age 38.0279 4.9977 7.60895 #NUM 26.2100 49.8458
woman 6 92 1 ! 6 6 26.21006 49.84586
5.3.4 Hypothesis 4. An increase in birth rate and retirement age positively affects the
work of the Pension fund in Ukraine.
Increasing the share of the population of retirement age, increasing pension benefits
leads to an increase in the social burden on the state budget and creates socio-economic
problems in many countries. According to socio-demographic statistics, from 2010 to 2030,
people of the post-war generation, which had a birth rate boom, will reach retirement age.
The solution to macroeconomic and demographic problems to ensure financial
stability is to develop an approach that will be effective in the short and long term, able to
work smoothly in times of unstable economic and demographic situation and manage
pension and state budget expenditures, reduce the Pension fund budget deficit and provide a
decent pension for retirees.
As a result, it is important to look at the long-term effects of changes in birth rates
and rises in retirement age (short-term).
If we consider the case of Ukraine, it should be noted that Ukraine's population will
continue to shrink and age, leading to a significant change in its demographic structure in
the coming decades. For example, if the birth rate and mortality rate remain unchanged
from their current level, by 2050, the population will decrease by 30%.
Demographic processes have a direct impact on the work of the Pension fund.
Table 19. Fertility rate, average pension age and Pension fund gap in Ukraine (2009-2018)
Fertility Average Gap,

rate, births Pension age, biliion
Year per woman years UAH
2009 1.473 56.5 -17.30
2010 1.443 57.5 -5.70
2011 1.459 57.5 -13.20
2012 1.531 57.75 -11.00
2013 1.506 58 -0.10
2014 1.498 58.25 -1.60
2015 1.506 58.5 -0.90
2016 1.466 58.75 3.20
2017 1.3741 59 1.70
60
2018 1.301 59.25 -4.70

The solution to this problem may be the process of increasing the birth rate. With
positive population growth, the birth rate guarantees a stable future, where there will be
enough labor to pay taxes to sustain the economy. The impact on fertility rates does not
have a rapid effect on economic development. The result will be noticeable in 20 years. But
still, when building the right program of state stability, this point also applies.
In contrast to the impact on the birth rate, the change in the retirement age gives an
immediate result when implementing the reform. When the retirement age is raised, the
fund is replenished with additional payments, and enterprises are provided with the
necessary labor force. But changes must be reconciled with many other factors, such as life
expectancy, quality of health care, the creation of education courses to improve professional
skills. After all, it is known that employers are reluctant to hire employees of pre-retirement
age, and therefore there is unemployment among older people. Raising the retirement age
with low health care can lead to growing distrust of the government and numerous protests,
and every step in this regard must be considered and justified by the state.
Table 19 presents the birth rate, the average retirement age, and the Pension fund
deficit in Ukraine for ten years (2009-2018). Since the state intends to equalize the
retirement age for men and women in the future, the average retirement age is used. Based
on the indicators from the table, the analysis was performed, and the following results were
obtained.
Table 20 Result of the study of the influence factor of retirement age, fertility rate on Pension fund
activities in Ukraine
Multiple R 0.861502
R Square 0.742185
Adjusted R
Square 0.668523
Observations 10
Significan
df SS MS F ce F
Regressi 155. 10.075
on 2 311.42 71 62 0.008701
15.4
Residual 7 108.18 5
Total 9 419.60
Coeffici Standard t P- Lower Upper Lower Upper
61
ents Error Stat value 95% 95% 95.0% 95.0%

- 0.0039
Intercept -538.83 127.95 4.21 8 -841.38 -236.27 -841.38 -236.27
Fertility 0.1320
rate 37.65 22.08 1.70 1 -14.57 89.86 -14.57 89.86
Pension 0.0030
age 8.25 1.86 4.43 43 3.84 12.65 3.84 12.65
According to the calculations of the equation will be as follows:
y=−538.83+37.65∗x 1 +8.25∗x 2 (5. 17)
where,
x 1- fertility rate, births per woman
x 2 – average pension age, years
These tables show that the model is statistically significant and the relationship
between indicators exists (R Square = 0.742185, Significance F =0.008701). According to
the values of the t-test data in Table 20, we can conclude that the changes in the
independent variables (Fertility rate, Pension age) are statistically significant and can be
used for research. Therefore, it is necessary to investigate the impact of the set indicators on
the deficit (surplus) of the Pension fund budget. First, consider the scenario details.
Table 21. Details of Hypothesis 4
Scenarios Fertility rate Retirement age

1. Basic 1.301 59.25
2. Optimistic 1 1.56 59.25
2 1.3 71
3 1.56 71
3. Pessimistic 1 0.83 59.25
2 1.3 47.4
3 0.83 47.4
The baseline scenario is one in which the level of indicators remains unchanged.
Thus, the natural population movement remains at the same level, and the government's
policy on regulating the retirement age remains as before.
Optimistic scenarios are divided into three groups, where each provides for specific
changes that can positively affect the Pension fund's performance. The essence of the first
optimistic scenario is that due to the influence of the state on the birth rate, only this
indicator increases, and the retirement age remains unchanged (at the level of 2018). In the
second optimistic scenario, the government implements demographic policies to increase
the birth rate and raises the retirement age, which we assume will have the highest positive
effect. Finally, due to the absence or failure to influence population growth, the third
62
scenario only assumes an increase in the retirement age, which is most similar to the reality
of the situation in Ukraine today.
Negative impact scenarios are also divided into three groups, which allows us to
investigate the impact of each factor on the value of the variable. The first pessimistic
scenario is a decrease in the birth rate, provided that the retirement age remains unchanged.
This situation is displayed in modern society. After all, more and more women today, unlike
women of the previous century, prefer career development instead of caring for the family.
Therefore, the birth rate tends to decrease and, in this scenario, is presented as one child per
woman. The second pessimistic scenario has the worst consequences for the economic
performance of the Pension fund. It can be assumed that there is a crisis in the demographic
sphere, but at the same time, the government is deciding to reduce the retirement age. There
can be many reasons, such as mass protests, the terms of international agreements, and
others. Therefore, the latest scenario includes only a reduction in the retirement age,
provided that the birth rate remains at the level of 2018.
From the calculations, we can conclude that our hypotheses have been confirmed.
As the birth rate has a slower effect on the pension system, encouraging childbearing will
not lead to an increase in Pension fund revenues for quick results. However, it should be
noted that such a policy will have a positive effect in the future.
Table 22. Hypothesis 4 scenario summary
Pessimistic Basic Optimistic

Scenario
1 2 3 1 2 3
Indicator
Fertility rate 0.83 1.3 1.04 1.301 1.56 1.3 1.56
Retirement age 59.25 47.4 47.4 59.25 59.25 71.1 71
PF 96.3
-18.95 -99.05 -108.83 -1.30 8.45 105.33
deficit/surplus 7
Each scenario has its economic results. The best result is reflected in the Optimistic
scenario with an increase in both the birth rate and retirement age. As a result of the increase
in these two indicators, it will be possible to overcome the deficit and receive a profit of the
Pension fund in the amount of 105.33 billion hryvnias. Stable operation of the Pension fund
without an increase in both indicators (baseline scenario) will lead to a deficit of more than
one billion hryvnias. If the birth rate situation in Ukraine worsens, and for some reason, the
government reduces the retirement age, it will lead to a deficit of the Pension fund in the
amount of 108 billion hryvnias.
63
Raising the retirement age is a mechanism that can instantly replenish the fund with
new funds and solve the deficit problem. We can see this in the results of the Optimistic
third scenario, where the only condition was an increase in the retirement age. At the same
time, lowering the retirement age could have a significant negative impact on the economy
of the Pension fund and the country as a whole.
5.3.5. Hypothesis 5: An increase in birth rate, urbanization rate, and life expectancy
has a positive effect on the work of the Pension fund in China
China is a country with a more stable economy than Ukraine, but it also has many
demographic problems. In the last century, there was a significant population growth, which
provided the country with a large labor force for the development of the state. Subsequently,
due to the introduction of the one-child policy, rapid population growth was halted.
Currently, the main demographic problems of China are the aging population and the
growing share of the urban population.
The growing share of urbanization has a double effect. First, under China's pension
system, urban residents are more likely to receive a higher pension than rural residents.
Therefore, population growth in cities can lead to higher pension costs. On the other hand,
young people, not older people, usually move to cities. They still have many years to reach
retirement age, so their payroll deductions become the basis for pensions to current retirees.
And because salaries in cities are higher, more contributions to the Pension fund will be
made.
Despite the rapid growth of people of retirement age, China's Pension fund is
efficient in its activities. Unlike the Pension fund of Ukraine, which always has a deficit of
income, the Chinese Pension fund reflects the profit. Receiving high contributions, as well
as using financial investments to increase revenues, the Pension fund of China annually
reflects an excellent financial result
64
Chinese Pension Fund Profit, billion yuan

800 745.5
700
600
619
500 429.4
511.8 398.7
400 464.2 491.4
426.6
300
311.8
200 259.7
100
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Chinese Pension Fund Profit, billion yuan
Figure 22. Chinese Pension fund profit, billion yuan

To perform the analysis, we will need data such as the Pension fund profit, the
retirement age in China, urbanization, the birth rate, and life expectancy.
Table 23. Fertility rate, pension age, urbanization rate, life expectancy, Pension fund surplus in
China (2009-2018)
Fertility Life Surplus,

Pension age, Urbanization
Year rate, births expectancy, biliion
years rate, %
per woman years CNY
2009 1.623 55 47.88 74.119 259.7
2010 1.627 55 49.23 74.409 311.8
2011 1.632 56 51.27 74.708 464.2
2012 1.639 55 52.57 75.013 511.8
2013 1.647 55 53.73 75.321 491.4
2014 1.656 55 54.77 75.629 429.4
2015 1.665 55 56.1 75.928 426.6
2016 1.675 55 57.35 76.21 398.7
2017 1.683 55 58.52 76.47 619
2018 1.69 55 59.58 76.704 745.5
The trend of recent years shows that the birth rate in China with the abolition of the
one-child policy is growing and, in 2018, is almost 1.7 births per woman. As in the case of
calculations in Ukraine, the birth rate will show the economic result in 20-25 years. This
process has a positive side because if the birth rate is low, the government can predict that
after a certain period, there will be a shortage of labor and less money in the budget, and the
government will have time and opportunity to implement other solutions (e.g., raising taxes,
production automation).
Table 24. Result of the study of the influence factor of the fertility rate, urbanization rate,
retirement age, life expectancy on Pension fund activities in China
65
Multiple R 0.893248
R Square 0.797892
Adjusted R Square 0.696837
Observations 10
df SS MS F Signif F
142051.
Regression 3 4 47350.46 7.895676 0.01663
35982.0
Residual 6 7 5997.012
178033.
Total 9 5
Stand. Lower Lower Upper

Coeffic. Error t Stat P-value 95% Upper 95% 95.0% 95.0%
95672.7 41114.1 196275.
Intercept 6 8 2.327001 0.058882 -4930.03 196275.5 -4930.03 5
19021.4 12959.2 50731.5
Fertility rate 4 5 1.467789 0.192537 -12688.7 50731.58 -12688.7 8
Urbanizatio 135.174 18.8528 680.371
n rate 349.612 1 2.586383 0.041413 9 680.3712 18.85289 2
Life 873.835 208.780
expectancy -1929.42 6 -2.20799 0.069335 -4067.62 208.7807 -4067.62 7
Since the retirement age did not change in the study of 10 years, the study of its
impact on the model will not be of any importance, so we did not include this indicator in
the calculations.
As we can see, our data explain the dependent variable y (Pension fund profit) by
79.8%, which is a good indicator and proves that there are still many unconsidered factors
that affect the indicator y. There is a relationship between the dependent and independent
variable, characterized by the value of R Square and equal to 0.797892. Analyzing the value
of the t-test of variables, we can say that statistically important are the changes in Fertility
rate and Urbanization rate, less statistically significant differences in Life expectancy.
The model will be presented as:
y=95672.76+19021.44∗x 1+ 349.61∗x 2−1929.42∗x3 (5. 18)
where,
x 1 – Fertility rate in China, Births per woman;
x 2 – Urbanization rate in China,
x 3 – Life expectancy at birth, years.
According to the table, we can conclude that with the growth of birth rates and the
level of urbanization, there will be an improvement in the work of the Pension fund, budget
revenues will increase, and this will be able to cover all costs. But the coefficient of life
66
expectancy shows that the increase in age leads to a direct increase in the cost of
maintaining retirees, which reduces the surplus of the Pension fund. The next step is
determining the impact on the size of the surplus in several scenarios.
Table 25. Details of the scenario of hypothesis 5
Scenarios Fertility rate Urbanization rate Life expectancy

1. Basic 1.69 59.58 76.70
1. 2.02 59.58 76.70
2. 1.69 71.5 76.70
2. Optimistic
3. 1.69 59.58 61.36
4. 2.02 71.5 61.36
1. 1.35 59.58 76.70
2. 1.69 47.66 76.70
3. Pessimistic
3. 1.69 59.58 92.05
4. 1.35 47.66 92.05
The baseline scenario reflects the state of the Pension fund at constant current
indicators.
The first optimistic scenario reflects an increase in the birth rate, provided that other
indicators are unchanged. This situation can happen if the government promotes
childbearing with some child support and certain privileges for large families. The second
optimistic scenario assumes an increase in urbanization. This process is currently taking
place in China; the number of cities with a population of millions is growing every year.
According to the UN, by 2030, the share of the urban population will be 75%, so we chose
this figure for calculations. The third optimistic scenario is to reduce life expectancy. This
scenario is not possible in modern society, because on the contrary, life expectancy in the
world is growing every year due to improved health care, improved food quality, and
changing habits of the population. Such a scenario is possible in the face of significant
cataclysms, nuclear wars, and new dangerous diseases. It should be noted that this scenario
is optimistic for the results of the Pension fund and not for the life of society and humanity
in general. The fourth optimistic scenario involves combining all three of the previous ones
to see what the result will be if all three policies are incorporated.
Four pessimistic scenarios envisage a change in these three indicators, which will
lead to a deterioration in the Pension fund's performance, in our case, a surplus. The first
pessimistic scenario assumes a decrease in the birth rate to 1. There can be many reasons:
the current employment of women, the introduction of other public policies. But since the
fertility rate does not give an instant result, it will not impact the work of the pension fund
today. The second pessimistic scenario aims to consider the impact of an adverse change in
67
the level of urbanization. It is believed that urbanization is a continuous process and will
always grow to the maximum level. After all, the modern world is difficult to imagine with
a return to rural life. Therefore, this hypothesis is considered only for informational
purposes.
Table 26. Hypothesis 5 scenario summary
Scenario Pessimistic Basic Optimistic

1 2 3 4 1 2 3 4
Indicator 1.69 1.69 1.35 1.69 2.02 1.69 1.69 2.03
Fertility rate 1.35
Urbanization 59.58 47.66 59.58 47.66 59.58 59.58 71.5 59.58 71.5
rate
Life expectancy 76.7 76.7 92.05 92.05 76.70 76.7 76.7 61.36 61.36
PF - - - - 654.7 6939.5 4829.8 30259.7 40894.4
deficit/surplus 5804.78 3504.86 28954.05 39588.7 9 9 9 8 5
2
In the third pessimistic scenario, consider the increase in life expectancy in China.
This process is natural, and indeed the life expectancy is growing every year, so in the
future, the Pension fund should provide additional costs for the maintenance of pensioners.
The fourth scenario will display the result of a combination of the three previous.
All indicators were changed by 20%. In optimistic scenarios, they increased by 20%,
and in pessimistic ones, they decreased. The table of calculations clarifies that the
consequences of such changes for the Pension fund are different. As we can see, the
difference in life expectancy has the most significant effects, and this value is growing
every year. As you can see from the table, each scenario has its own economic
interpretation. The fourth Optimistic scenario has the best result from the point of view of
finances, as the indicators are growing, which is a positive phenomenon for the Pension
fund's expenditures, except for the increase in life expectancy, which directly affects the
growth of costs. The surplus is 40894.45 billion yuan. But we understand that the
simultaneous growth of all four indicators is impossible in today's world is a utopian
statement, but it is necessary to explain the relationship between indicators. Life expectancy
has the strongest economic effect on the performance of the Pension fund. If the life
expectancy of the population decreases, the Pension fund will have a surplus of 30259.78
billion yuan, and if it increases, then the government will have to fill the deficit of 28954.05
yuan. The other policy of the state in pension provision should be carried out, considering
this problem. These calculations make it clear that the issue of population aging has a direct
impact on the economy. The process of urbanization and fertility has less influence, but the
same must be considered in implementing policies.
68
5.4 Recommendations
The solidarity pension system functioned well if the number of employees was large
and the number of pensioners was small. But in the 1980s and 1990s, the situation in
Ukraine changed dramatically: the demographic transition to a family with 1-2 children was
completed; increased life expectancy and the number of retirees; the number of employees
decreased. In China, the demographic situation has deteriorated as a result of the one-child
policy. So now the world is on the verge of the necessary changes in pensions.
There are three reasons for states to reconsider the pension sector's fundamental
principles and restructure its institutions.
The first reason is the intensive aging of the population. The successful operation of
the solidarity mechanism is only possible at a 10:1 ratio, which means one pensioner should
have ten payers of pension contributions.
Secondly, it is also determined by the number of payers and recipients' ratio but is
not demographic but economical. There is a steady upward trend in unemployment and a
reduction in the number of formally employed people who contributed to the Pension fund.
The third reason is the low retirement age and the overall system of early retirement.
It is a legal and institutional cause that could seemingly be remedied by law. However, as
world experience shows, the change in the retirement age is one of the most sensitive issues
for the population and meets with severe public opposition.
From the research, we know, in China and Ukraine, there is a three-tier pension
system, but, as practice shows, only the first level is invited. The first level of the pension
system involves using contributions from existing workers to pay pensions to current
retirees. But this system demonstrates its inefficiency every year. If decisive action is not
taken, the situation will only worsen, there will more than 1 pensioner for one employee in
time, which could lead to the collapse of the pension system.
Calculations of the impact of aging on the Pension fund have shown that aging is
enormous on the costs and revenues of the Pension fund. The aging process will continue,
as evidenced by scientific studies. The state may have minimal influence on fertility
processes, but this will not solve the global problem. The solution lies in a radical reform of
the world pension system.
When choosing a pension strategy, there are quite various solutions, including a
radical abandonment of the principle of distribution and the construction of a new system of
accumulative type. There are several possibilities. The first is to increase the income of the
69
Pension fund by increasing contributions. The reduction of the Pension fund's expenses can
occur only due to the decrease in the number of pensioners, i.e., the refusal to pay early
pensions and the increase of the general retirement age. The methods considered do not
result in systemic improvements to the operating system and, as it turned out, do not
decrease the instability of its balance in fast-aging populations. A third option was to review
the fundamental principles of pensions and try to invent new schemes to answer the
following general policy priorities: reducing the pension system's reliance on demographic
factors; strengthening the connection between the size of pensions and a citizen's actual
contributions to the pension system over his working life; and increasing the employee's
contribution to the pension system.
The second and third stages of pension restructuring, which allow for accumulation,
must be implemented. However, the government must first implement a set of changes
before the pension scheme can be improved. To get started, it is needed to build an
Accumulative fund. This fund's pension contributions can be used to cover covered people's
lifetime pension agreements or lump-sum transfers. Before implementing, it should be
noted the following:
 the savings system will apply only to future pensions of contributors, and
current pensioners will not receive assistance from it;
 the introduction of the accumulative system will require either the
distribution of pension contributions between the solidarity and accumulative plans, which
will increase the budget deficit of the solidarity system or the introduction of additional
donations, which will increase the burden on wages;
 the accumulative system is highly vulnerable to economic crises and
inflation.
The government in China, based on high economic growth, has set new ambitious
goals and objectives in the social sphere: to overcome poverty, reduce property stratification
in society, achieve a high level of education and health measures, increase demand in the
domestic market, withdraw China in terms of GDP per capita at the level of developed
countries. At the present stage, despite the well-thought-out and consistent steps of the
Chinese government to build an effective social protection system, measures taken to
modernize and continuously update it following the growing economic capabilities of the
state and the needs of its citizens, there are significant social problems in China. The
government must provide effective transformation of economic growth into social progress
through the formation of a funded system.
70
Among the main priorities that would allow the practical introduction of the second
and third levels of the pension system, it is advisable to highlight:
 the formation of basic macroeconomic preconditions. Among them - the
constant growth of at least 3-4% of GDP, compared to previous years, reducing
unemployment due to job creation, low inflation, higher wages;
 increasing the investment attractiveness of financial instruments for
investment accumulative pension programs. The formation of a stable financial market will
contribute to the development of economic and social infrastructure of the state, faster
overcoming of the financial crisis;
 economic education of youth and the working-age population on the
introduction of mandatory funded pension insurance, determining its benefits for every
citizen.
The introduction of a funded pension system is suitable for China's strong economy,
where there is no pension fund deficit, and this type of pension can solve current and future
more serious problems of population aging.
In Ukraine, a Pension fund is a subsidy, which complicates the process of
implementing a funded pension system. Especially due to the problem of population aging
and the reduction of the share of employees, there is also the problem of the tax burden on
the employee. Therefore, first the Ukrainian government must address many issues that will
allow the implementation of a funded pension system
First, Ukraine needs to reduce the share of the shadow economy. There is still a
problem in Ukraine to avoid large amounts of taxation; employers pay only the minimum
wage officially; the rest of the money is issued in cash without documents. Today's task is to
interest both parties in reducing the share of such covert operations. In my opinion, this is
possible under the condition of personalized accounting of pension contributions, which
will contain information about how much money you pay now and how it will affect your
pension in the future.
For the successful implementation of pension reform in Ukraine, it is essential to use
the experience of countries in the following areas:
 providing political support to the pension reform by the authorities based on
reaching a consensus on legislative approval;
 achieving broad public support for pension reform through the development
of a particular strategy for educational programs;
71
 development of a transition financing program to create a mandatory savings

system;
 implementation of measures to reform the financial and banking systems,
creating a viable stock market;
 providing conditions for the introduction of a compulsory savings system;
 ensuring a stable financial condition of the Pension fund;
 differentiation of pension financing under various programs (insurance
premiums for all categories of the population should be used only on the principle of
participation of the insured person in the formation of the Pension fund, all other additional
payments should be made from other sources: from the State budget, enterprises, and
organizations, etc.).
 the personification of accounting in the Pension fund for the participation of
insured persons in the labor market;
 identification of the needs for qualified personnel, equipment, and funds
required to meet the requirements of the new system;
 providing conditions for the effective implementation of the private pension
system.
Having implemented all these measures, Ukraine and China will be ready to move to
the next stage of pension reform and the introduction of a funded pension insurance system.
Only under such conditions countries can avoid the huge financial burden due to the rapid
aging of the population.
72
Conclusion
We got acquainted with many scientists in population aging and the risk impact on
the Pension fund at work. We have found out the concepts and role of the Pension fund in
the state economy, and we have understood the main mechanisms of work in various world
pension systems. We found that the pension systems of countries from different continents,
such as Australia, the United States, Germany, China, and Ukraine, are based on the PAYG
system. Subsequently, it was found that this pension system is the most vulnerable to
population aging because it is based on employee contributions and is paid to today's
pensioners. These countries have disappointing forecasts for the economy of Pension funds
since there will be more than one pensioner per employee. Pension Sustainability Index in
the Pension fund was studied.
The demographic indicators of China and Ukraine and the reasons for the
demographic imbalance were also considered. Demographic changes directly affect the
work of the pension fund, as income and expenses depend on the number of people who pay
social contributions and who receive them. From the graphs and tables, we can see a direct
link between the increase in the number of retirees and the increase in the cost of providing
them, the problem is global, so it needs to be addressed as soon as possible. It is necessary
to introduce a slow and gradual transition from a solidarity system to an individual
accumulative one. But in the system where the money paid for pension contributions is used
directly for payments to current retirees, this is impossible.
Public authorities must act immediately because the problem of population aging is
becoming more serious every year. We can see the effect of population aging from the
performed simulation. In each state, it is necessary to create a special commission, which,
taking into account the peculiarities of the economy, demographic situation, will draw up a
detailed plan for the transition of a solidary pension system to a funded one put this plan
into effect. Currently, this is one of the most effective solutions to population aging in the
context of the Pension fund crisis.
72
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中图分类号：F841

作者姓名: 莉莉娅 LS1808238

A Dissertation submitted for the Degree of Master

Candidate: Liliia Mokliak

School of Economic and Management,

作者姓名 莉莉娅 申请学位级别 金

学科专业 金融学 研究方向 金融

学习时间自 2018 年 09 月 01 日 起至 2021 年 05 月 26 日

论文提交日期 2021 年 04 月 28 日 论文答辩日期 2021 年 05 月 26

学位论文作者签名： 日期： 2021 年 4月

学位论文作者签名： 日期： 2021 年

指导教师签名： 日期： 2021 年 04 月

1 Introduction of pension fund management system......................................................1

1.1 Introduction and Background....................................................................................1

1.2 Research outcome, theory, and methodology............................................................2

1.3 Research data.............................................................................................................3

2.1 The Conception of pension funds..............................................................................5

2.2 Pension system in different countries........................................................................8

2.3 Demographic indicators...........................................................................................10

2.4 Pension system economic indicators.......................................................................11

2.5 Econometric models in Pension management system.............................................12

3 Levels and trends in population aging........................................................................15

3.1 Aging population general overview.........................................................................15

3.2 Analysis of the main demographic indicators.........................................................20

4.1 Pension fund legislation...........................................................................................31

4.2 Pension fund activity...............................................................................................32

4.3 Pension benefits level..............................................................................................35

4.4 Pension fund contribution........................................................................................38

4.5 Financial sustainability in Pension fund..................................................................39

5 The impact of population aging on the work of the pension fund...........................46

5.1 Model description....................................................................................................46

5.2 A set of scenarios.....................................................................................................49

1 Introduction of pension fund management system

1.2 Research outcome, theory, and methodology

1.3 Research data

1.3.1 International data

We refer to international databases as resolutions and documents of international

5) OECD “Strengthenіng the application of OECD Core Principles of Private

1.3.2 Domestic data

M. Cadoni defined a pension fund as a financial institution that invests retirement

Old-age pension schemes anchored in national

Contributory Contributory scheme only 72 countries (39%)

Non-contributory universal schemes only 10

Contributory scheme and Non-contributory

Sources: ILO, 2015

1. More prepared to cope with the population's aging

1. Impose investment risks on workers (Although workers

Source: Schwarz, et al., 2014

2.2 Pension system in different countries

Nation Three-Pillar’ for each of Compulsory/ Source of Participation

Pillar2 Company or V Employer CA

To better understand the diversification of pension systems globally, it is necessary

2.3 Demographic indicators

2.4 Pension system economic indicators

2.5 Econometric models in Pension management system

Table 2. Principal component analysis, the seven primary components

Dataset 2001-2005 2006-2010 2011-2015

3 Levels and trends in population aging

作者姓名莉莉娅申请学位级别金

学科专业金融学研究方向金融

学习时间自 2018 年 09 月 01 日起至 2021 年 05 月 26 日

论文提交日期 2021 年 04 月 28 日论文答辩日期 2021 年 05 月 26

学位论文作者签名：日期： 2021 年 4月

学位论文作者签名：日期： 2021 年

指导教师签名：日期： 2021 年 04 月